Though inflation has been subsiding, it is still up by 4% compared to last year, with a slight increase of 0.1% between April and May, according to the U.S. Bureau of Labor Statistics. While this is certainly an improvement over the last year, it still leaves investors concerned about a possible recession in the second half of 2023.

Which is why many investors are looking at dividend stocks to provide passive income. Dividend stocks are shares of publicly traded companies that regularly distribute a portion of their earnings to shareholders in the form of dividends. A dividend is a payment made by a company to its shareholders as a reward for owning its stock. Dividend stocks are popular among investors who seek a regular income stream from their investments.

When a company earns profits, it can choose to retain those earnings for reinvestment in the business or distribute them to shareholders. Companies that distribute a portion of their profits as dividends are often well-established, stable, and have a consistent track record of generating profits.

Dividend stocks typically pay dividends on a regular basis, such as quarterly, semi-annually, or annually. The amount of the dividend is usually expressed as a fixed dollar amount per share or as a percentage of the stock's current price, known as the dividend yield.

Investing in dividend stocks can be attractive to investors looking for both income and potential capital appreciation. Dividends provide a steady income stream, which can be particularly beneficial for retirees or those seeking passive income. Moreover, dividend-paying stocks have the potential for growth in share price over time, offering the opportunity for capital gains.

How to choose dividend stocks

There are a number of considerations you'll want to look at before choosing dividend stocks, and the three stocks I'm focusing on today check all the boxes. First off, investors should look at the dividend yield to see if it's providing you enough bang for your buck. The dividend yield is a percentage, providing you the annual value of dividends you'll receive from a company, relative to the dividend stock's current share price. Therefore, when a stock price is low it can be a great time to buy a dividend stock, as you can bring in more passive income for a lower cost.

But a dividend yield isn't the only item on your checklist. You'll also want to check out a dividend stock's dividend payout ratio. This measures how much of a company's earnings are paid out to shareholders. This ratio is incredibly important, as it can tell you if it looks like the company will be able to afford paying out the dividend yield in the future. For instance, if over 100% of a company's earnings are being paid out as dividends, there could be cut in the future to hold back some earnings. But if it's around 30%, that's an incredibly healthy payout ratio, and in fact there might be a dividend increase in the future instead.

Finally, you'll want to make sure you're going to be bringing in dividend income for the long run. Therefore, look back on the history of the company's dividend growth. While there could be a dip or two during periods like recessions, overall you want to see growth in dividends and earnings.  

Here are three dividend stocks with yields over 6% for your consideration:

Verizon Communications

Verizon Communications(VZ) is first on our list of top dividend stocks with yields above 7%, currently offering investors a 7.16% dividend yield. Furthermore, it also provides a dividend payout ratio at 51.53% as of writing, making it a healthy option for shareholders and potential investors.

Shares of Verizon stock are currently down 28% in the last year, and it currently has a 7.01 price-to-earnings (P/E) ratio as well, putting it in value territory. But now let's turn our attention to what makes this company such a great long-term choice for investors seeking passive income now, and in the future.

Verizon stock continues to remain focused on its wireless business, with its fiber networks continuing to build up in large cities across the U.S., ramping up spending in 2021 specifically to acquire a large chunk of these areas. While growth may be modest in the years to come, Verizon stock should still remain a top dividend stock offering consistent results for those looking for long-term income. Especially as it currently holds around 40% of the U.S. phone market, great than its largest peers at this point as well.

The current dividend yield of 7.16% comes to an annual dividend yield of $2.61 per share. It also boasts a dividend compound annual growth rate (CAGR) of 2.4% over the last decade.

A $5,000 investment in Verizon stock today would therefore bring in annual passive income of $361.70.

Rio Tinto

Next up on our list we have Rio Tinto (RIO), with one of the world's largest miners currently offering a 7.47% dividend yield as of writing. The payout ratio for Rio Tinto stock also comes to 89.75% as of writing. Not as great as Verizon stock, but definitely not unhealthy as the company can still afford the current dividend payout.

Shares of Rio Tinto stock are up 3.29% in the last year as of writing, but down 23% from 52-week highs. It also offers value trading with a P/E ratio of 8.63 right now as well. Yet again, now that we see it checks those boxes, let's turn our attention to why Rio Tinto is also a great long-term investment for Americans these days.

As one of the world's largest miners, the company has been shifting more and more of its attention to minerals that provide a purpose. That includes aluminum, iron ore and copper. Over the last few decades, global economic growth as well as specific growth from China has certainly benefited the company. As of 2021, China accounted for more than 60% of the company's sales. Yet with the boom in China slowly but surely declining, the company has shifted to strengthening its balance sheet, controlling investments, and returning cash the shareholders.

The current dividend yield of 6.65% provides an annual dividend at $4.49 per share. It also holds an incredible 10.16% dividend CAGR over the last decade.

A $5,000 investment in Rio stock would therefore bring in annual passive income of $325.

OneMain Holdings

Finally, we have OneMain Holdings(OMF), a finance company currently offering a 9.29% dividend yield. It also holds a healthy 59.68% dividend payout ratio, providing investors with a healthy dividend that recently saw an increase as well.

Shares of OneMain stock have also been doing quite well, up 18% in the last year, only slightly below 52-week highs. And again, it remains in value territory trading at just 7 times earnings as of writing.

Specialty finance companies like OneMain stock have been on the rise in the last few years. In this dividend stock's case, the company provides consumer credit loans to those with relatively low credit ratings. The company also remains a growing digital-lending operator, with $18.5 billion in its loan portfolio outstanding, 55% of which is secured, according to its first-quarter earnings. While the future of credit quality is a present concern, note that OneMain stock has been around for decades. Therefore, it's been through multiple downturns and come out the other side.

For now, you can grab the 9.29% dividend yield with an annual dividend at $4 per share. The dividend only started in 2019, but since then it's grown at a CAGR of 41%, though that's unlikely to continue in that amount. Even still, it shows that this company continues to be a strong dividend stock, that is only becoming stronger.

A $5,000 investment in OneMain stock would bring in annual passive income of $470.37.