Investors love dividend stocks, especially the ultra-yield variety because they provide a significant income stream and give investors a great opportunity for massive total returns. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation.
For example, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%—10% for the increase in stock price and 3% for the dividends paid.
More aggressive income investors often look for companies that pay dividends with yields that are in the double-digit nosebleed seats. While not suitable for everybody, stocks paying dividends higher than 10% and can keep their corporate ship steady are often huge winners for shareholders.
We screened our 24/7 Wall St. Ultra-Yield dividend research database and found six companies with super high reward potential to go with a high-risk caveat. Six companies hit our search and are all rated Buy, which is only suitable for those with a higher risk tolerance.
Alliance Resource Partners
This company is a leader in the thermal coal business, offers solid diversity, and a massive 14.18% yield. Alliance Resource Partners L.P. (NASDAQ: ARLP) is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States.
The company operates through four segments:
- Illinois Basin Coal Operations
- Appalachia Coal Operations
- Oil & Gas Royalties
- Coal Royalties
It produces a range of thermal and metallurgical coal with sulfur and heat contents.
The company operates seven underground mining complexes in:
- Illinois,
- Indiana,
- Kentucky,
- Maryland,
- Pennsylvania, and
- West Virginia.
In addition, it leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana, buys and resells coal, and owns mineral and royalty interests in approximately 1.5 million gross acres of oil and gas-producing regions, primarily in the Permian, Anadarko, and Williston Basins.
Further, the company offers various mining technology products and services, including:
- Data networks
- Communication and tracking systems
- Mining proximity detection systems
- Industrial collision avoidance systems
- Data and analytics software
Arbor Realty Trust
Arbor Realty Trust offers nationwide solutions for multifamily finance.
This company trades at a ridiculous 7.7 times estimated 2024 earnings and pays a massive 13.32% dividend. Arbor Realty Trust (NYSE: ABR) invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.
The company operates in two segments:
- Structured Business
- Agency Business.
Arbor Realty Trust primarily invests in:
- Bridge and mezzanine loans, including junior participating interests in first mortgages
- Preferred and direct equity and real estate-related joint ventures
- Real estate-related notes
- Various mortgage-related securities
The company offers:
- Bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property;
- Financing by making preferred equity investments in entities that directly or indirectly own real property;
- Mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction;
- Junior participation financing in the form of a junior participating interest in the senior debt and
- Financing products to borrowers seeking conventional, workforce, and affordable single-family housing.
Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs.
Dynex Capital
Paying a hefty 12.72% dividend, Dynex Capital, Inc. (NYSE: DX) is a passive income champion for more aggressive investors. It is a mortgage real estate investment trust that invests in mortgage-backed securities (MBS) on a leveraged basis in the United States.
It invests in agency and non-agency mortgage-backed securities (MBS), including residential, commercial, and interest-only securities.
Agency MBS has a guarantee of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity, such as Fannie Mae and Freddie Mac.
Non-agency MBS has no such payment guarantee. The company has qualified as a real estate investment trust for federal income tax purposes. It is generally not subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders as dividends.
Frontline
Frontline is the world’s fourth-largest oil tanker shipping company.
While off the radar of most investors, this shipping company could explode higher and pay a massive 12.62% dividend. Frontline plc (NYSE: FRO) engages in the seaborne transportation of crude oil and oil products worldwide. It owns and operates oil and product tankers.
In a press release earlier this year, the company announced it would sell its five oldest VLCCs (very large crude carriers), built-in 2009 and 2010, for an aggregate net sale price of $290 million.
The vessels are expected to be delivered to the new owner during the first quarter of 2024. After repaying the ship’s existing debt, the transaction is expected to generate approximately $207 million in net cash proceeds.
The Company expects to record a gain in the first quarter of 2024 of roughly $68 million to $76 million, depending on the delivery date of each vessel to the new owner. According to industry standards, the sale is subject to certain closing conditions.
Following the transaction and the completion of the delivery of all 24 VLCCs acquired from Euronav NV, Frontline’s fleet will consist of:
- 84 vessels comprised of 41 VLCCs
- 25 Suezmax tankers
- 18 LR2/Aframax tankers
FS KKR
This is a well-known name on Wall Street, offers a solid entry point at current levels, and pays a massive 14.56 dividend. FS KKR Capital Corp. (NASDAQ: FSK) is a business development company specializing in investments in debt securities. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments.
The company also seeks to invest in:
- First-lien senior secured loans
- Second-lien secured loans
- Subordinated loans
- Mezzanine loans
The firm also receives equity interests in connection with debt investments, such as warrants or options for additional consideration. It also seeks to purchase minority interests in common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor.
The fund may invest in corporate bonds and similar debt securities opportunistically.
The fund does not seek to invest in start-ups, turnaround situations, or companies with speculative business plans. It aims to invest in small and middle-market companies in the United States.
FS KKR seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.
Mach Natural Resources
This late 2023 IPO trades below the initial price and pays a gigantic 20% dividend. Mach Natural Resources (NYSE: MNR) is an independent upstream oil and gas company focused on the acquisition, development, and production of oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas, and the panhandle of Texas.
The analysts at Raymond James noted that the company is led by Tom Ward, Co-Founder of Chesapeake Energy; Mach is another entrant into the E&P MLP space. MNR is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.
Mach’s midstream position and lower base decline (~20%) allow the company to target a lower reinvestment rate (~30%) relative to the overall industry.
It should be noted that while the distributions for the rest of the year should put the payout in the 16% to 18% range, Mach Natural Resources’s first payout was for a period longer than a standard quarter.
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