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- Most stocks pay dividends quarterly, so monthly pay is enormous for many needing passive income.
- These stocks could explode higher when interest rates finally come down.
- Access 2 legendary, high-yield dividend stocks Wall Street loves.
Investors are drawn to dividend stocks, particularly the ultra-yield variety because they offer a significant income stream and the potential for massive total returns. Total return encompasses interest, capital gains, dividends, and distributions realized over time. The total return on an investment or a portfolio combines 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%. That is, 10% for the increase in stock price and 3% for the dividends paid.
Most stocks pay quarterly dividends, which is fine for many shareholders who reinvest dividends. However, many investors rely on dividends as part of a passive income stream, and getting a monthly dividend payout is more beneficial. Typically, real estate investment trusts, business development companies, and closed-end funds are among the investment vehicles that pay distributions monthly.
We screened our 24/7 Wall St. ultra-high-yield dividend research, looking for quality companies with yields over 10% that deliver monthly payouts to shareholders. We found six stocks that look like solid bargains now.
Why do we cover these stocks?
The combination of monthly dividends and yields exceeding 10% is the perfect combination for passive income investors with a higher risk tolerance to generate significant streams of dependable passive income.
AGNC Investment
AGNC Investment provides private capital to the housing market in the United States.
This company has paid solid monthly dividends for years; its current yield is 14.55%. AGNC Investment Corp. (NASDAQ: AGNC) is a real estate investment trust (REIT) in the United States.
The company invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by the United States government-sponsored enterprise or by the United States government agency.
The company funds its investments primarily through collateralized borrowings structured as repurchase agreements. It has elected to be taxed as a REIT under the Internal Revenue Code 1986. However, it would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
Dynex Capital
Dynex Capital is an internally managed mortgage real estate investment trust (REIT) that invests in mortgage-backed securities.
Paying a hefty 12.37% 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 a U.S. government agency 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.
Ellington Financial
Ellington Financial has been at the forefront of data-driven investing since its founding in 1994.
This is a quality mortgage REIT company that is a favorite across Wall Street and pays a massive 12.84% dividend. Ellington Financial Inc. (NYSE: EFC), through its subsidiary, Ellington Financial Operating Partnership, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States.
The company develops and manages residential mortgage-backed securities (RMBS) backed by:
- Prime jumbo
- Alt-A, manufactured housing, and subprime residential mortgage loans
- RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity
- Residential mortgage loans
- Commercial mortgage-backed securities
- Commercial mortgage loans and other commercial real estate debt
Ellington Financial also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments. In addition, the company offers consumer loans and asset-backed securities backed by consumer and commercial assets.
Horizon Technology Finance
Horizon is a venture lending platform that provides structured debt products to life science and technology.
Paying a stout 11.42% dividend, this stock has tremendous upside potential. Horizon Technology Finance Corp. (NASDAQ: HRZN) is a business development company specializing in lending and investing in development-stage investments.
It focuses on making secured debt and venture lending investments to venture capital-backed companies in these industries.
- Technology
- Life science
- Healthcare information and services
- Cleantech
- Sustainability
Horizon is a leading venture lending platform that offers structured debt products to life science and technology companies. Its experienced investment and operations team has provided debt capital to some of the most exciting companies for decades.
The members of the Horizon team have, collectively, originated and invested more than $5 billion in venture loans to thousands of companies. Since 2004, Horizon has directly originated and invested more than $3 billion in venture loans to more than 315 growing companies.
PennantPark Floating Rate
Pennant Park invests in middle-market companies located primarily in the U.S., with a proven management team, competitive market positions, and strong cash flow.
Almost ignored by Wall Street, this is another business development company with a massive 10.90% dividend. PennantPark Floating Rate Capital Ltd. (NYSE: PFLT) seeks to invest through floating rate loans in private or thinly traded or small market-cap, public middle market companies.
It primarily invests in the United States and, to a limited extent, non-U.S. companies. The fund typically invests between $2 million and $20 million.
The fund also invests in
- Equity securities
- Preferred stock
- Common stock
- Warrants or options received in connection with debt investments or through direct investments
It primarily invests between $10 million and $50 million in senior secured loans and mezzanine debt. It seeks to invest in companies not rated by national rating agencies.
The fund invests 30% in non-qualifying assets like:
- Investments in public companies whose securities are not thinly traded or do not have a market capitalization of less than $250 million,
- Securities of middle-market companies located outside of the United States
- High-yield bonds
- Distressed debt
- Private Equity
- Securities of public companies that are not thinly traded
- Investment companies as defined in the 1940 Act
Under normal conditions, the fund expects at least 80 percent of its net assets plus any borrowings for investment purposes to be invested in floating-rate loans and investments with similar economic characteristics, including cash equivalents invested in money market funds. It expects to represent 65 percent of its portfolio through senior secured loans.
Prospect Capital
Prospect Capital is a leading provider of flexible private debt and equity capital.
Hedge funds love this top Business development company, and the gigantic 13.74% dividend makes it a potential total return home run. Prospect Capital Corp. (NASDAQ: PSEC) specializes in the middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending, and bridge transactions.
It also invests in the multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second-lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses.
Prospect Capital focuses on both primary origination and secondary loans/portfolios and invests in situations such as debt financing for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, and real estate financings/investments.
The company invests in the following sectors and business silos:
- Aerospace and defense
- Chemicals
- Conglomerate and consumer services
- Ecological
- Electronics
- Financial services
- Machinery and manufacturing
- Media
- Pharmaceuticals
- Retail
- Software
- Specialty minerals
- Textiles and leather
- Transportation,
- Oil gas and coal production
In addition, it favors materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, health care, food and beverage, education, business services, and other select sectors.
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