The S&P 500(SNPINDEX: ^GSPC) has staged an epic recovery and is now positive year to date as investors look past ongoing macro challenges and focus on long-term growth.
The rebound has increased the valuations of many stocks and exchange-traded funds (ETFs) -- making major indexes like the S&P 500 relatively expensive. But there are still compelling bargains if you know where to look.
Here's why Phillips 66(NYSE: PSX), J.M. Smucker(NYSE: SJM), and the Global X MLP & Energy Infrastructure ETF(NYSEMKT: MLPX) are great buys for investors looking to generate passive income from dividend stocks and ETFs.
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Dedicated to rewarding shareholders -- and maybe even more so now
Scott Levine (Phillips 66): With energy prices plunging over the past year, many oil and gas stocks have received a cold shoulder from investors. Shares of leading refining company Phillips 66, for example, have plummeted more than 18% over the past year as of this writing. Disconcerting as this drop may be, it provides a great buying opportunity for investors to load up on a solid energy stock that currently offers a 4.3% forward yield.
It's not merely the fact that Phillips 66 offers a high-yield dividend that makes it alluring. From 2012, the first full year it paid a dividend after it was spun off, through 2024, the company has boosted its dividend higher at a compound annual growth rate of 15%. While returning an increasing amount of capital to shareholders, management hasn't been willing to jeopardize the company's financial well-being. Over the past five years, Phillips 66 has averaged a 72% payout ratio.
While it operates midstream assets and has a chemicals business, it's the company's refining business that contributes most to its bottom line. From 2021 through 2024, the refining business represented, on average, 38% of the company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Phillips 66 has succeeded in reducing refining costs over the past couple of years, and it's targeting further reductions by 2027 -- something that makes further dividend hikes more likely. After reducing refining costs from $6.98 per barrel in 2022 to $5.90 in 2024, management has set a goal of dropping this to $5.50 by 2027.
Another potential factor that could help drive further dividend growth is the recent activist investor activity, which resulted in Elliot Investment Management picking up two board seats.
Those looking to procure more passive income would be well served to gas up their portfolios with Phillips 66.
A high-yield cash cow at a bargain-bin price
Daniel Foelber (J.M. Smucker): J.M. Smucker got hammered on Tuesday -- falling 15.6% in a single session. That steep of a sell-off is unusual for a traditionally low-growth, stodgy, dividend-paying company.
The stock is now treading water at its lowest level in over 12 years.
The packaged food company has a diverse portfolio of brands spanning five key categories -- U.S. retail coffee (led by Folgers and Café Bustelo), retail frozen handheld and spreads (Jif peanut butter, Uncrustables sandwiches, Smucker's toppings, etc.), U.S. retail pet foods (brands like Milk-Bone and Meow Mix), and sweet baked snacks (mainly Hostess products like Twinkies).
The challenge with J.M. Smucker is that some of its products depend on discretionary spending (like treats for pets). Many of its snack brands are pressured by competition and changing buyer preferences toward healthier options. Throw in inflationary challenges and tariffs, and it's easy to see why J.M. Smucker profits have been falling. Given these headwinds, some investors may pass on J.M. Smucker and not think twice about buying the beaten-down value stock. But J.M. Smucker has an exceptionally valuable ace in the hole -- its free cash flow (FCF).
Even during a down year, the company still generated $816.6 million in FCF compared to $455.4 million in dividend payments. Better yet, it expects FCF to tick up higher in fiscal 2026 -- reaching $875 million. J.M. Smucker has a generous 4.6% yield and 29 consecutive years of dividend increases , making it a great stock for collecting passive income.
J.M. Smucker's growth is slowing, but the stock's valuation already reflects investor concerns -- with the company guiding for $8.50 to $9.50 in fiscal 2026 adjusted earnings per share. Even if it achieves the low end of that earnings guidance range, it would still have a dirt-cheap adjusted forward price-to-earnings ratio of just 11.1.
Add it all up, and J.M. Smucker is a great choice for value investors looking for a high-yield dividend stock to buy in June.
This ETF offers diversification and a 4.5% dividend yield
Lee Samaha(Global X MLP & Energy Infrastructure ETF): This ETF currently yields 4.5% and offers investors a way to get diversified exposure to investing in America's future as an energy superpower.
The fund invests in midstream infrastructure (pipelines and storage) companies. They tend to have relatively stable streams of income from take-or-pay contracts and offer less sensitivity to the price of energy compared to companies such as oil and gas exploration and production companies or oil and gas services companies.
That's not to say the companies it invests in, such as Kinder Morgan, Cheniere Energy, and Energy Transfer, don't have indirect exposure to the price of energy, because they do. High energy prices encourage investment in energy development, which in turn leads to increased production. That makes signing long-term contracts with customers a lot easier for pipeline and storage companies.
Another factor improving the prospects for energy infrastructure companies is an administration committed to promoting energy production and ensuring the U.S. achieves energy self-sufficiency and the capability to export energy. It's no coincidence that President Donald Trump's secretary of the interior is Doug Burgum, the former governor of North Dakota, a major oil-producing state.
It's also notable that one of the first actions Trump took in office was to remove the pause on export permit applications for new liquefied natural gas terminals that had been put in place by the previous administration. It all adds up to making this ETF an attractive investment, particularly with the price of oil still above $60 a barrel.
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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cheniere Energy, J.M. Smucker, and Kinder Morgan. The Motley Fool recommends Phillips 66. The Motley Fool has a disclosure policy.
