There are plenty of ways to generate passive income, such as bonds, Treasury notes, high-yield savings accounts, and even stocks. Dividend stocks can be especially effective over the long term because their passive income element complements the potential gains from the investment growing in value over time. Whereas other vehicles are entirely centered around passive income.

Lockheed Martin (LMT 1.19%), Air Products & Chemicals (APD 0.88%), and FedEx (FDX 0.99%) are three industry-leading companies with growing dividends. By investing $4,000 into each stock, you can expect to earn at least $300 in total passive income per year. Here’s why all three dividend stocks are worth buying now.

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Lockheed Martin’s dividend and valuation are attractive

Lee Samaha (Lockheed Martin): While the long-term outlook for defense spending is uncertain, the medium-term environment is very positive. The need to replenish equipment used in conflicts in Europe and the Middle East, the likelihood of NATO members fulfilling their spending commitments, and the heightened geopolitical tension create demand for defense equipment.

Indeed, Lockheed Martin ended 2024 with a record backlog of $176 billion — a figure representing 2.4 years of sales, based on the midpoint of management’s 2025 sales guidance.

Moreover, given that the company had a book-to-bill ratio (a metric that measures bookings over revenue) of 1.2 times in 2024, the defense company has excellent momentum with orders. CEO Jim Taiclet noted that “each and every one of our four business areas saw backlog growth and ended the year with a book-to-bill ratio of greater than 1. We fully expect these positive trends to continue in our 2025 outlook, with mid-single-digit growth in sales.”

In addition, management’s guidance for 2025 implies it will easily cover its dividend per share ($13.20) with earnings per share (guidance of $27-$27.30) and free cash flow (guidance of $6.7 billion compared to a dividend costing $3 billion in 2024).

Indeed, that’s been the case with Lockheed Martin for a while.

LMT Dividend Per Share (TTM) data by YCharts

Lockheed Martin’s customers are reliable (governments), defense spending holds up well in a slowdown, and the current environment remains favorable. Everything points to the company being a reliable stock for passive income-seeking investors over the next few years.

Air Products is an industry leader with an impressive record of dividend hikes

Scott Levine (Air Products & Chemicals): Whether you’re a younger investor looking to grow dependable dividend income over decades, a more experienced investor interested in procuring more passive income in retirement, or you’re somewhere in between, industrial gas supplier Air Products & Chemicals demands consideration. The company has logged more than four decades of boosting its payout to shareholders, and its stock currently offers a 2.4% forward dividend yield.

Supplying and delivering industrial gases is not something done easily — especially on the scale that Air Products operates. The company’s infrastructure includes 1,800 miles of industrial gas pipeline as well as over 750 production facilities. This high barrier to entry, consequently, has helped Air Products remain one of the leading industrial gas suppliers, a position that it’s not likely to cede anytime soon. With regards to hydrogen production, in particular, Air Products has emerged as a leader, a position that it’s fortifying with the development of various projects such as the NEOM green hydrogen project in Saudi Arabia and a blue hydrogen production plant in Louisiana.

Hiking its dividend higher for 43 consecutive years, Air Products has demonstrated a steadfast commitment to shareholders. Unlike companies that nudge their dividends nominally higher, Air Products has boosted its payout at an approximately 8% compound annual growth rate from 2014 to 2025. And it’s not as if the company’s sacrificing its financial health in doing so. Over the past five years, Air Products has averaged a 61% payout ratio.

Changing hands at 17 times trailing earnings, Air Products is trading at a discount to its historic P/E of 27. If you’re passionate about passive income, today’s a great time to power your portfolio with Air Products stock.

FedEx is a great value even though the near-term outlook is poor

Daniel Foelber (FedEx): FedEx fell to a 52-week low on March 21 after reporting weak third-quarter fiscal 2025 results and slashing its full-year guidance. The package delivery giant reported adjusted revenue of $22.2 billion — up just 2.3% compared to the same quarter last fiscal year. Operating income was up 11% year over year.

The real concern was guidance — which calls for a year-over-year decrease in revenue and adjusted earnings per share of $18 to $18.60 — below the prior forecast of $19 to $20 per share. In June 2024, when FedEx reported full-year fiscal 2024 results, it forecasted $20 to $22 in adjusted fiscal 2025 EPS.

Wall Street hates uncertainty. So when a company’s performance deteriorates rapidly and it slashes guidance over and over again, the stock price will probably reflect investor frustrations.

Another concern is tariffs. Transportation companies like FedEx benefit from economic growth and the global exchange of goods. Tariffs can make it less attractive for countries to trade with the U.S. and increase input costs for U.S. companies — which could be a negative for FedEx. There’s also the ongoing issue of high interest rates, which increase borrowing costs and slow economic growth.

All told, the near-term setup for FedEx isn’t great, which is probably why the stock has been sliding lately — now down over 18% year to date at the time of this writing.

FedEx looks like a great buy for long-term investors willing to look past the near-term headlines. Based on the midpoint of its updated adjusted earnings guidance, the company has a price-to-earnings ratio of just 12.6. FedEx’s yield is now 2.3% — which isn’t high-yield territory, but it is a solid stream of passive income. For context, well-known dividend stocks like Procter & Gamble and McDonald’s feature yields of 2.4% and 2.3%, respectively. So FedEx is in that same range.

Even during a slowdown, FedEx can easily afford to pay and grow its dividend. FedEx’s dividend is just $5.52 per share — less than a third of its earnings guidance — giving the company an ultra-safe payout ratio.

Add it all up, and FedEx is an excellent value stock to buy and hold if you have at least a three to five-year investing time horizon.