The Best High-Yield Dividend Stocks for Passive Income in June 2025: Safety and Sustainability in Action

In a world of low interest rates and market volatility, high-yield dividend stocks remain a cornerstone of passive income strategies. However, not all high yields are created equal. Investors must balance yield with safety, ensuring dividends are backed by strong cash flows, conservative payout ratios, and a track record of growth. In this article, we spotlight two top picks—Realty Income (O) and Enterprise Products Partners (EPD)—for their ability to deliver robust income while maintaining financial discipline. We'll also caution against chasing excessive yields that may mask hidden risks.

Key Criteria for High-Yield Dividend Safety

Before diving into our top picks, let's outline the pillars of a sustainable dividend strategy:1. Yield: A meaningful payout (typically 4%+), but not so high it raises red flags.
2. Cash Flow Strength: Dividends should be comfortably covered by free cash flow (for corporations) or distributable cash flow (for MLPs/REITs).
3. Payout Ratio: A conservative metric—ideally below 75% of cash flow—to ensure dividends don't overextend the business.
4. Dividend Growth History: Companies with decades of increases (e.g., Dividend Aristocrats or Kings) have proven resilience.

Top Pick #1: Realty Income (O) – The "Monthly Dividend REIT"

Realty Income, known as the “Monthly Dividend Company,” is a REIT specializing in net-lease properties (e.g., retail, office, industrial). Its June 2025 dividend yield of 5.6% (projected to rise to 5.8% by year-end) makes it a standout income generator. Here's why it's safe:
- Cash Flow Resilience:
- AFFO per share (a REIT's cash flow metric) grew 2.9% year-over-year in Q1 2025 to $1.06.
- Dividend Coverage: AFFO covers the dividend at a 75.1% payout ratio, leaving ample room for margin pressures. Cash flow coverage is 81.6%, further insulating against downturns.
- Growth Track Record:
- 131 consecutive dividend increases since its 1994 NYSE listing.
- 50-year dividend growth streak, with a 3-year average annual increase of 2.8%.
- Risk Mitigation:
- Liquidity Buffer: $2.9 billion in cash and undrawn credit facilities.
- Diversification: 10,000+ properties leased to 1,000+ tenants, reducing reliance on any single sector or tenant.

Investment Thesis: Realty Income's conservative payout and property diversification make it a low-risk, high-yield staple for passive income portfolios.

Top Pick #2: Enterprise Products Partners (EPD) – The MLP Dividend Champion

Enterprise Products Partners, a master limited partnership (MLP), operates energy infrastructure (pipelines, storage, processing). Its 6.8% dividend yield (as of June 2025) pairs with a 26-year streak of dividend increases—making it a Dividend King. Key strengths:
- Cash Flow Stability:
- DCF (distributable cash flow) grew 5% year-over-year in Q1 2025 to $2.0 billion, with 1.7x coverage of its distribution.
- Forward Guidance: 2025 DCF is projected to rise 9%, supporting its 4.9% 3-year annualized dividend growth.
- Payout Discipline:
- DCF payout ratio: 57.4%, ensuring ample cash reserves.
- Earnings Payout Ratio: While higher at 78.7%, management expects it to drop to 73.7% in 2026 as margins stabilize.
- Operational Moat:
- $40 billion in assets: Pipelines and terminals serving 90% of U.S. refining capacity.
- Inflation Protection: Contracts with fee-based or volume-driven pricing insulate cash flows.

Investment Thesis: EPD's energy infrastructure dominance and disciplined cash flow management position it as a high-yield, low-volatility option for passive income.

Caution: Avoiding the "Yield Trap"

While O and EPD exemplify sustainable high yield, many stocks with double-digit payouts (e.g., 10%+) are yield traps. Red flags include:
- Payout ratios exceeding 100% of cash flow (e.g., a 12% yield with a 120% payout ratio).
- Debt-laden balance sheets with little cash flow to service obligations.
- Volatility in cash flows (e.g., cyclicals like airlines or commodities during downturns).

Investors should avoid these traps and focus on companies like O and EPD, which prioritize dividend sustainability over short-term gains.

Final Takeaways for Passive Income Investors

1. Prioritize Cash Flow Coverage: Dividends should consume ≤75% of cash flow.
2. Look for Growth Consistency: 10+ years of dividend increases signal management's commitment.
3. Diversify Your Portfolio: Pair high-yield stocks with bonds or dividend ETFs to reduce risk.

Top Picks for June 2025:
- Realty Income (O): A 5.6% yield, 50-year dividend growth, and diversified real estate portfolio.
- Enterprise Products Partners (EPD): A 6.8% yield, 26 years of growth, and energy infrastructure stability.

Both offer tax efficiency (EPD's MLP structure defers taxes on gains; O's REIT structure avoids double taxation), making them ideal for taxable accounts.

Final Advice: These two stocks are cornerstones of a high-yield, low-risk portfolio. Avoid chasing gimmicky high yields—safety and sustainability matter most.

Always conduct your own research and consult a financial advisor before making investment decisions.