The Federal Reserve could begin cutting interest rates as early as this month — which could be great news for dividend stocks.

Higher rates have made certificates of deposit and high-yield savings accounts more attractive to income investors over the past two years or so. But as rates of return begin going down again, there will be more incentive to hold dividend stocks. And that’s not counting the ways lower rates could benefit the kinds of companies that often pay dividends. For capital-intensive businesses that tend to carry a high amount of debt on their balance sheets, lower interest rates can reduce the cost of capital and make debt financing less expensive.

Lower rates should be excellent news for investors in pipeline and energy infrastructure giant Kinder Morgan (NYSE: KMI) and utilities Dominion Energy (NYSE: D) and Southern Company (NYSE: SO). Investing $800 into each stock should produce over $100 a year in passive income. Here’s why all three companies are rock-solid dividend stocks to buy now.

Kinder Morgan has made the necessary moves to regain investors’ trust

Kinder Morgan slashed its dividend by 75% in December 2015 to preserve cash and address its overly leveraged balance sheet. Nearly nine years later, Kinder Morgan has turned its business around by managing spending and paying down debt.

The blueprint for a successful midstream oil and gas company like Kinder Morgan is to build useful infrastructure projects that can earn steady cash flows for decades. Kinder Morgan’s pipelines act as toll booths for exploration and production companies, while its terminals provide storage, distribution, blending, and logistical needs for petroleum products, chemicals, and renewable fuels.

Kinder Morgan has made several reasonably sized acquisitions in recent years for legacy assets and to boost its exposure to liquefied natural gas and low-carbon fuels. Kinder Morgan also believes natural gas will play a role in powering the growth of energy-intensive data centers, though the extent of that opportunity remains to be seen.

With a dividend that’s steadily risen over the past few years and yields 5.3% at recent prices, Kinder Morgan can power your portfolio with passive income.

Meet the new Dominion Energy

Dominion Energy might be beating the S&P 500 this year, but zoom out and the stock has been a terrible performer over the medium term, losing 28% of its value over the last five years.

Blame the bulk of that underperformance on a business model that used to be more complex. Dominion used to own oil and natural gas production assets, pipelines, and utilities. But it has sold off a large portion of those assets over the last five years to Berkshire Hathaway Energy and Enbridge. Today, Dominion is more focused on its regulated electric utility assets.

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Dominion is concentrated in Virginia, West Virginia, North Carolina, and South Carolina. These states are ripe for offshore wind opportunities, between coastal access to shallow waters along the continental shelf and the government’s desire to bring down emissions. Dominion’s Coastal Virginia Offshore Wind (CVOW) project is costly but expected to be decently efficient. Subsidies, such as those provided by the Inflation Reduction Act, will help make the project more affordable. And Stonepeak acquired a 50% interest in CVOW in February, which will help reduce Dominion’s commitment. With less capital at stake, Dominion is better positioned from a risk management perspective.

For years, Dominion has been a messy company to invest in, and dividend investors suffered. Dominion cut its quarterly payout from $0.94 per share to $0.63 in late 2020 to reset expectations and get the dividend back to a manageable point. It has since raised that payout back to $0.6675 per share for an impressive yield of 4.8% at recent prices.

With the worst likely in the rear view, Dominion looks like a good dividend stock to buy now.

The perfect role player in a passive income portfolio

With a market cap around $95 billion, Southern Company is one of the most valuable U.S.-based utilities — and for good reason. Primarily focused on the Southeastern U.S., the utility’s foundation is centered on traditional electric operating companies. But it also has a natural gas distribution and utility segment and a power generation arm that includes wind, solar, and natural gas generation facilities. Southern Company’s business model helps it generate predictable cash flows from long-term contracts and power purchase agreements.

The company has raised its dividend for over 20 consecutive years, with the dividend roughly doubling during that period. It’s not the fastest growth rate, but Southern Company wants to ensure it keeps its payout ratio in check. For that reason, we can expect the dividend to grow at roughly the same pace as earnings so Southern Company can maintain a payout ratio between 50% and 75%. That way, the dividend expense doesn’t become too much of a burden.

With a 20.6 price-to-earnings ratio and a yield of 3.3% at recent prices, Southern Company is a reliable dividend stock for income investors to consider now.

Should you invest $1,000 in Kinder Morgan right now?

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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Enbridge, and Kinder Morgan. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

All It Takes Is $800 Invested in Each of These 3 High-Yield Dividend Stocks to Generate Over $100 in Passive Income Per Year was originally published by The Motley Fool