All you need is a $27,000 investment in these two high-yield dividend stocks and an ETF to potentially earn more than $1,000 in annual passive income.

Investing in the stock market offers an effective way to build wealth by purchasing shares of strong companies and retaining those investments for many years.

Choosing companies or exchange-traded funds (ETFs) that pay quarterly dividends allows investors to earn regular cash returns without needing to sell their holdings. If your financial strategy includes passive income, dividends can be a powerful component.

Allocating $27,000 equally between Chevron ( CVX -0.64%), Coca-Cola ( KO -0.83%), and the Schwab U.S. Dividend Equity ETF ( SCHD -0.87%) could help you generate no less than $1,000 in dividends each year. Let’s take a look at why these two stocks and this ETF are such compelling choices at the moment.

A dependable high-yield pick for cautious investors

Lee Samaha (Chevron): Chevron is popular among those seeking passive income, thanks to its diversified mix of upstream and downstream operations, robust financial foundation, and outstanding ability to generate free cash flow. Its recent acquisition of Hess adds valuable assets and further stabilizes its business.

Moreover, Chevron is projected to see a considerable rise in cash flow over the next few years, providing management with the flexibility to boost dividends or repurchase shares. To illustrate, leadership expects the Hess acquisition to add $2.5 billion to free cash flow (FCF) by 2026, on top of the $10 billion increase anticipated from new production in areas such as Kazakhstan, the Gulf of Mexico, and the Permian Basin, along with other locations globally.

In sum, management estimates that by 2026, based on current energy prices, the company will generate an extra $12.5 billion in FCF beyond the $15 billion expected in 2024. Wall Street analysts are more cautious, forecasting $24 billion in FCF for 2026 and $28 billion for 2027.

Regardless of whether these targets are met in 2026 or 2027, Chevron's free cash flow will easily cover its current $11.7 billion dividend payout and leave significant capacity for share buybacks, enhancing returns for shareholders. This solidifies Chevron's position as a top pick for income-oriented investors.

Coca-Cola stands strong despite a tough market climate

Daniel Foelber (Coca-Cola): Over the short term, share prices may fluctuate for reasons unrelated to a company's long-term prospects. That seems to be what’s happening with Coca-Cola right now.

The company’s stock has been declining even as the S&P 500 ( ^GSPC -0.05%) has been trending upward recently. Except for a notable surge following its February earnings announcement, Coca-Cola’s share price has mostly mirrored the consumer staples sector, which has performed poorly in 2025.

KO statistics provided by YCharts.

Consumer staples may not attract as much attention when large-cap growth companies—the “Ten Titans”—are hitting record highs. Additionally, many companies serving consumers, whether staples or discretionary, are feeling the impact of higher interest rates and rising living costs.

Although Coca-Cola isn’t completely insulated from these headwinds, it is performing better than many competitors. Its strengths include an exceptional supply chain, an extensive network of bottling partners, strong marketing and brand presence, and an increasingly diversified beverage portfolio that focuses more on low- and no-sugar drinks, teas, coffees, juices, energy drinks, and sparkling water. Recent earnings calls highlighted that products like Coca-Cola Zero Sugar and Diet Coke are driving volume increases. The company even plans to switch its U.S. Trademark Coca-Cola from high-fructose corn syrup to cane sugar later this year, aligning with the Trump administration's “Make America Healthy Again” campaign.

Despite industry obstacles and evolving consumer tastes, Coca-Cola expects to grow its non-GAAP earnings per share (EPS) by 3% to reach $2.97. On a currency-neutral basis, non-GAAP EPS could rise by 8%. Because Coca-Cola generates more sales internationally than domestically, it is particularly affected by currency fluctuations, which are currently unfavorable. The non-GAAP metric provides a clearer picture of business performance by excluding these uncontrollable factors.

With a 3% yield and a 63-year streak of dividend increases, Coca-Cola remains a standout choice for those seeking steady high-yield dividend stocks.

Looking to boost your passive income? The Schwab U.S. Dividend Equity ETF is worth considering

Scott Levine (Schwab U.S. Dividend Equity ETF): For some investors, the process is straightforward—they research, purchase, and move forward. Others may feel overwhelmed by the abundance of stock choices and data, leading to indecision. For those interested in dividends but hesitant to pick individual stocks, the Schwab U.S. Dividend Equity ETF, which offers a 3.7% yield, can be an excellent solution.

The Schwab U.S. Dividend Equity ETF is composed primarily of top dividend-paying companies, with the largest allocation to the energy sector. This is logical, given the significant number of oil and gas companies that pay dividends. Chevron and ConocoPhillips are the ETF's two largest holdings, at 4.4% and 4.3% respectively. Consumer staples and healthcare follow, making up 18.8% and 15.5% of the ETF. Combined, these three sectors represent over half the ETF’s total allocation.

This ETF distributes dividends quarterly and, with a total expense ratio of just 0.06%, offers a cost-effective way to earn substantial passive income without high management fees.