Investors love dividend stocks because they provide dependable income and a great opportunity for solid total return. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or portfolio consists of income and stock appreciation.
At 247 Wall St., we always remind our readers about the impact total return has on portfolios because it is one of the best ways to improve the chances of overall investing success. Again, total return is the combined increase in a stock’s value plus dividends.
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.
We screened our 24/7 Wall Street dividend stock equity database, looking for the best stocks that pay a 9% or higher dividend. Five companies have hit our screens, two of which are among the world’s biggest cigarette and tobacco companies. All look like solid ideas for passive income investors with higher risk tolerance.
Altria
This maker of tobacco products offers value investors a great entry point now and a rich 8.81% dividend. Altria Group Inc. (NYSE: MO) manufactures and sells smokable and oral tobacco products in the United States through its subsidiaries.
The company provides cigarettes primarily under the Marlboro brand;
- Cigars and pipe tobacco, principally under the Black & Mild brand
- Moist smokeless tobacco and snus products under the Copenhagen, Skoal, Red Seal, and Husky brands
- on! Oral nicotine pouches
It sells its tobacco products primarily to wholesalers, including distributors and large retail organizations, such as chain stores.
Altria owns over 10% of Anheuser-Busch InBev (NYSE: BUD), the world’s largest brewer. Recently, the company announced it would sell 35 million of its 197 million shares through a global secondary offering.
Ares Capital
This high-yielding business development company (BDC) pays a massive 9.37% dividend. Ares Capital Corp. (NASDAQ: ARCC) specializes in the acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle-market companies.
It also makes growth capital and general refinancing. It prefers to invest in companies engaged in basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.
The fund will also consider investments in:
- Restaurants
- Retail
- Oil and gas
- Technology
It focuses on investments in the Northeast, Mid-Atlantic, Southeast, and Southwest regions from its New York office, the Midwest region from the Chicago office, and the Western region from the Los Angeles office.
The fund typically invests between $20 million and $200 million and a maximum of $400 million in companies with an EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million
The fund invests through:
- Revolvers
- First-lien loans
- Warrants
- Unitranche structures
- Second-lien loans
- Mezzanine debt
- Private high yield
- Junior Capital
- Subordinated debt
- Non-control preferred and common equity
The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically finds the purchase of stressed and discounted debt positions.
Ares Capital prefers to be an agent and lead the transactions it invests in. The fund also seeks board representation in its portfolio companies.
Berry Corporation
While off the radar, Berry Corp. (NYSE: BRY) could be a huge winner. It trades at just 11.5 times earnings and posts a stunning 9.29% dividend. Berry is an independent upstream energy company that develops and produces conventional oil reserves in the western United States.
It operates through two segments:
- Exploration and Production (E&P)
- Well Servicing and Abandonment (CJWS)
The E&P segment develops and produces onshore, low-geologic-risk, and long-lived conventional oil and gas reserves, primarily in California and Utah.
CJWS provides well site services in California to oil and natural gas production companies, focusing on:
- Well servicing
- Well abandonment
- Water logistics
It also offers:
- Rig-based and coiled tubing-based healthy maintenance and workover services
- Recompletion services
- Fluid management services
- Fishing and rental services
- Ancillary oilfield services
British American Tobacco
This European giant continues to print money and pays a massive 9.40% dividend.
British American Tobacco PLC (NYSE: BTI) offers:
- Vapor
- Tobacco heating
- Modern oral nicotine products
- Combustible cigarettes
- Traditional oral products, such as snus and moist snuff
The company offers its products under:
- Vuse
- Glo
- Velo
- Grizzly
- Kodiak
- Dunhill
- Kent
- Lucky Strike
- Pall Mall
- Rothmans
- Camel
- Natural American Spirit
- Newport
- Vogue
- Viceroy
- Kool
- Peter Stuyvesant
- Craven A
- State Express 555
- Shuang Xi brands
Gladstone Capital
Yielding a strong 9.35% dividend paid monthly to investors, this company is a steal at current trading levels. Gladstone Capital Corp. (NASDAQ: GLAD) is a business development company specializing in:
- Lower middle market
- Growth capital
- Add-on acquisitions
- Change of control
- Buy and build strategies
- Debt refinancing
- Debt investments in senior term loans, revolving loans, secured first and second lien term loans, senior subordinated loans, unitranche loans, junior subordinated loans
- Mezzanine loans and equity investments in common stock, preferred stock, limited liability company interests, or warrants
The fund also makes private equity investments in acquisitions, buyouts, recapitalizations, and refinancing existing debts.
It targets small and medium-sized companies in the United States. It is industry agnostic and seeks to invest in companies engaged in:
- Business services
- Light and specialty manufacturing
- Niche industrial products and services
- Specialty consumer products and services
- Energy services
- Transportation and logistics
- Health care and education services
- Specialty chemicals
- Media and communications
- Aerospace and defense
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