2 Income Stocks To Buy For Passive Income In January

There’s an interesting fact that often gets overlooked when discussing stock market returns. Dividend payments have historically made up quite a significant portion of overall returns — in fact, over the past 10 years, roughly 23% of the S&P 500’s total returns can be attributed to dividends.

That proportion varies from decade to decade, but we have strong reason to believe that distributions will play a significant role in 2026. In Q4 of 2025, net dividend payments totalled $13.1 billion — a significant increase from the prior quarter’s $10.6 billion figure. S&P Dow Jones Indices expects a further increase in Q1 of 2026, owing to record-high earnings and sales levels.

But here’s the question — how can you reliably find stocks that offer both the potential for significant capital appreciation and strong dividend payments? The best place to look for them is our…

Income Stock Strategy

Our in-house quant rating system uses 115 unique factors to evaluate roughly 4,600 stocks each day. Those findings are put together and packaged into a single, user-friendly metric — a stock’s Zen Rating.

The top 5% of stocks are given a Zen Rating of A, equivalent to a Strong Buy rating. While that does narrow the search down quite a bit, it still leaves roughly 230 stocks to consider. Thankfully, there’s a simple way to make the research process even more efficient — you just have to turn to one of our Zen Strategies.

There are 11 Zen Strategies in total — each is an exclusive portfolio consisting of just 7 carefully selected stocks. Today, we’ll be taking a look at a portfolio that has already provided a 3.46% return since the start of 2026 — our Income Stock Strategy.

Macy’s (M)

A nationwide department store chain with a broad physical and digital retail footprint, Macy’s is our first pick. M shares currently rank in the top 3% of the equities that we track — it also ranks 1st overall in the Department Store industry, which has an Industry Rating of A.

So, what makes it so great? For one, it ranks in the top 2% of stocks according to the Value Component Grade rating, thanks to a very appealing price-to-earnings (P/E) ratio of just 13.32x, far below the market average of 45.1x.

When it comes to Growth, M ranks in the 77th percentile of equities — on account of being able to grow earnings at a time when earnings in the Department Stores industry are generally shrinking.

What about the dividends? Right now, Macy’s has a forward dividend yield of 3.05%, and since its payout ratio stands at 41.4%, it appears quite stable.

The only downside? It doesn’t have Wall Street’s seal of approval. Right now, the average forecast implies a 14.16% downside.

Macy’s has beaten earnings estimates for an impressive 16 consecutive quarters, however.  Here’s why you should put it on your watchlist ASAP — it delivered the most recent earnings beat on December 3. Despite the impressive results, the stock has dropped by 9.19% in the past 30 days — so now is a great time to buy the dip.

Cohen & Co. (COHN)

Our second pick might be the most unorthodox ticker we’ve ever covered. A Zen Strategies first, Cohen & Co is a nano-cap stock — the company’s market cap is just $36.3 million. Yet its metrics are impressive: The stock ranks in the top 2% of the equities that we track.

The company is a full-service capital markets firm that advises, manages capital, and engages in principal investing.

Yes, that sounds pretty generic. But a quick look at the metrics will demonstrate why you should pay attention to COHN.  

Let’s begin with the dividend. Right now, the forward dividend yield stands at 6.94%. That’s quite high — but in this case, since the payout ratio is at 41.2%, there’s no reason to worry.

With a P/E of 7.34x and a price-to-earnings growth (PEG) ratio of 0.15x, it’s clear the stock is quite undervalued, especially relative to growth prospects. In terms of Value, it ranks in the top 8% — when it comes to Growth, it’s in the top 6%. For the cherry on top, we have a pretty strong balance sheet, which puts COHN in the 83rd percentile for Financials.

Here’s the long and short of it — this is a small, little-known stock — so there’s very little coverage to go off of. However, our system has picked up on some really strong fundamentals — so there’s a chance to get in on it before everyone else wisens up.

The downside? Liquidity is quite low, so getting out of a position could be an issue. The stock has seen a huge 31.73% dip in the past 5 days — however, you shouldn’t panic, as this was the result of investors rushing to cash in on a special $2 dividend. 

Right now, COHN is trading at roughly the same level it was a month ago — at the time of writing, it’s seen a 4.54% surge in the past 24 hours, so this amount of attention might end up being what propels Cohen & Co into the limelight.

Final tally? The valuation is attractive, the growth prospects are there, and the dividend is great — but with a lack of liquidity, you should keep position sizing conservative.

Interested In More Great Stock Picks?

The 3 stocks highlighted above are just a fraction of what you get from our proven Income Stock strategy. 

That’s because each day our system recalibrates — and Zen Strategies members get access to the 7 top Buy the Dip stocks based on 115 different parameters that point to outperformance. 

See all Top 7 Income Stocks here >

However, maybe dividends aren’t what you’re interested in right now. Perhaps you would like to see all 11 of our market beating strategies including Growth, Momentum, Technology, and our coveted AI Factor model. 

Each featuring the top 7 stocks.

Each featuring tremendous performance

We spell it all out in this timely presentation below that lives up to its name:

10 Minutes a Month to Beat the Market > 

What to Do Next?

• 77 Best Stocks NOW! >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.