24/7 Wall Street Insights:

• Inflation is continuing to advance in real costs to consumers.
• Dividend stocks provide a number of features that can help families stretch their dollars to keep up with inflation through passive income. 
• For investors seeking dividends, click here for a free report on two high dividend stocks.

The effects of massive inflation are being felt around the world, and not just in large urban cities with a high cost of living. Pundits and statisticians tout how inflation is coming down, but only the rate of inflation is lowering, inflation is still on the rise. All that means is that prices are going up at a slower pace than before. To illustrate, instead of taking 2 weeks at 8% interest to see groceries rise another $10 per week, it may take 4 weeks at 4% interest. The price will still go up $10 at the end of that time.

Going without essential food, medicine, and fuel is not a viable option for the vast majority of households. Income augmentation is the only alternative, if cost cutting measures still fall short. A second job or side hustle may fit the bill, if one has the bandwidth. For those who cannot spare the additional time but have investable assets, dividend stock might be the solution. 

Why Dividend Stocks?

As a source of passive income, dividend stocks have a number of attractive features:

• Low cost of admission (unlike investments in real estate or other businesses)
• Diversification of Industry (managing risk with a portfolio mix of various sector stocks)
• Liquidity
• Volatility ranges
• Replaceability (if one stock receives adverse news, it can easily be replaced by another stock with a comparable yield)

24/7 Wall Street has an enormous database of dividend stocks to suit all levels of risk tolerance, and has published numerous past articles highlighting them. This collection gives a wide selection of the types available that would be considered high-yield, since the average yield from the group is in double digits. Prices and passive income amounts are based on market price at the time of this writing.

Petróleo Brasileiro S.A. – Petrobras

Stock #1 : Petróleo Brasileiro S.A. – Petrobras (NYSE: PBR)

Shares for $10,000: 723.58

Yield: 20.14%

Annual Passive Income: ~$2,014

Based in Rio de Janeiro, Brazil, Petróleo Brasileiro S.A. – better known as Petrobras, is the national oil company of Brazil. It is the 12th largest oil company in the world, based on market cap. Petrobras owns 13 out of Brazil’s 19 refineries, and is one of the largest contributors to its national GDP.

The company has three broad divisions: 

• Exploration and Production of oil and natural gas; 
• Refining, Transportation, and Marketing, which handles sales of crude oil and refined products, such as ethanol, 
• Gas and Power, which involves Liquid Natural Gas (LNG) logistics and trading, along with thermoelectric power generation;

Petrobras is focusing future efforts on off-shore oil exploration, and is attempting to do so in an ecologically responsible manner. A recently announced 5-year deal with Shearwater GeoServices will deploy Marine Vibroseis Technology to reduce its impact on marine life, and minimize the ecological footprint on seismic data gathering. 

Hafnia Limited

Stock #2 : Hafnia Limited (NYSE: HAFN)

Shares for $10,000: 1,278.77

Yield: 18.05%

Annual Passive Income: ~$1,805

While Petrobras’ operations deal primarily with oil exploration, extraction, and refining, Bermuda headquartered Hafnia Limited is involved with oil product transport. With a fleet of over 200 vessels, Hafnia is one of world’s largest maritime oil and chemical product bulk tanker specialist companies. Founded in 2010, Hafnia is 48% owned by BW Group, which is based in both Singapore and Oslo, Norway. 

From a dividend perspective, Hafnia had a 64% dividend payout ratio and delivered total shareholder returns of 51% in 2023. The company increased its dividend in April, 2024. 

MFA Financial, Inc.

Stock #3 : MFA Financial, Inc. (NYSE: MFA)

Shares for $10,000: 915.75

Yield: 12.82%

Annual Passive Income: ~$1,282

Tangible real estate has a prohibitively high admission cost for investors. Nevertheless, the principal mechanics of real estate investment are one of the fundamental passive income platforms. Real Estate Investment Trusts (REIT) are mutual fund-like entities that deliver a prorated income stream from real estate through share ownership. Registered with the SEC for tax purposes, REITs are required to remit 90% of profits to its shareholders. New York based MFA Financial is one such REIT.

Unlike some REITs that take an active hand in real estate financing, mortgage underwriting, and property management, MFA acts more in an investment management role. The company invests in residential mortgage paper assets, which can include agency sponsored securities like Freddie Mac and Fannie Mae. MFA also invests its $10.8 billion AUM in non-agency mortgages, mortgage backed securities, mortgage loans, and even distressed, non-performing real estate loans. 

CVR Partners, LP

Stock #4 : CVR Partners, LP (NYSE: UAN)

Shares for $10,000: 137.8

Yield: 12.57%

Annual Passive Income: ~$1,257

In order to feed the world’s population billions, large scale agriculture requires fertilizers and other technologies to maximize crop production. Ammonium nitrate and related products are a key component to this end. The global ammonium nitrate market was $21.6 billion at the end of 2023 and is expected to expand to $33.1 billion by 2032. Its distribution market is dominated by Japan, with 60%, and the US and China each with 20%. Russia is the world’s largest producer and consumer of ammonium nitrate products. 

CVR Partners is headquartered in Sugar Land, TX. The company produces and sells nitrogen-based ammonia and urea ammonium nitrate products for agricultural and industrial distributors and retailers for use in fertilizers for farming. It is a division of CVR Energy.  

WhiteHorse Finance, Inc.

Stock #5 : WhiteHorse Finance, Inc. (NASDAQ: WHF)

Shares for $10,000: 801.28

Yield: 11.80%

Annual Passive Income: ~$1,180

The Business Development Company (BDC) fills an important niche in the private corporate sector. Private corporations often have new projects, executive buyouts, acquisitions, and other kinds of financial requirements that conventional banks will not handle. The BDC steps in with private debt underwriting and finance that has exploded as a standalone financial sector over the past two decades. 

WhiteHorse Finance is a BDC based in Miami, FL. It finances lower and mid-tier companies with growth capital in the form of senior secured notes or first lien notes. It typically originates its debt underwritings in the the $25 million to $50 million range for US companies in the $50 million to $350 million enterprise value category.

Unusual for the BDC arena, WhiteHorse will sometimes engage in turnaround scenarios, such as American Crafts, Atlas Purchaser. Additionally, WhiteHorse  partnered in a joint venture with State Teachers Retirement System of Ohio, a public pension fund, in 2019, referred to as the WHF STRS JV. As of Q1 2024, WhiteHorse had increased its portfolio size to $697.9 million.

New Mountain Finance Corporation

Stock #6 : New Mountain Finance Corporation (NASDAQ: NMFC)

Shares for $10,000: 818.3

Yield: 11.05%

Annual Passive Income: ~$1,105

Not unlike with REITs, the BDC arena also invites niche specialization. In the case of New Mountain Finance Corporation, they prefer to provide the debt portion of corporate buyout scenarios for upper middle tier defensive growth companies with private equity backing. Unlike some of its peers, New Mountain Finance Corp. also has its own private equity division that may participate in a deal in conjunction with its debt finance arm. 

While focusing on companies that have measurably sustainable strengths in the face of volatile economic conditions, New Mountain is otherwise open to many industrial sectors. A look at its portfolio sector breakdown shows the following exposures:

• Software: 29%
• Business Services: 22%
• Healthcare: 18%

The remaining smaller demographics include Education at 7%, Consumer Services at 6%, Financial Services at 4%, and other comparable service areas.

The average New Mountain client company has $179 million EBITDA, 1.7x interest coverage, and a 43% LTV. New Mountain often seeks a majority stake in any company it decides to keep in its portfolio. 

Calamos Convertible and High Income Fund

Stock #7 : Calamos Convertible and High Income Fund (NASDAQ: CHY)

Shares for $10,000: 902.5

Yield: 10.77%

Annual Passive Income: ~$1,077

Shares in open end mutual funds can be bought directly, through banks, or other financial services entities, and are priced by NAV. Closed end mutual funds are traded on the NYSE or NASDAQ and are priced similarly to stocks. Both usually employ portfolio management services to maximize gains. 

Operating out of Naperville, IL, Calamos Convertible and High Income Fund is a closed end mutual fund designed for income oriented investors. Its $1.28 billion in assets under management (AUM) portfolio is invested in high yield, (i.e. junk rated) Ba rated or lower corporate bonds and in convertible bonds. Convertible bonds give the owner the option to convert the bond to a pre-set number of common equity shares at the owner’s discretion. 

The portfolio is relatively sector specific and the portfolio breakdown is focused in three areas: Utilities – 71.87%, Energy – 22.81%, and Consumer Cyclical – 4.75%.  

CrossAmerica Partners LP

Stock #8 : CrossAmerica Partners LP (NYSE: CAPL)

Shares for $10,000: 498.75

Yield: 10.42%

Annual Passive Income: ~$1,042

The reason why oil is such a precious commodity is because of all of its different uses in various refined forms: fuel, solvent, additive, plastic, lubricant, and so forth. The transportation and distribution of refined oil products are where the additional value is created and subsequently where wholesale and retail level profits are earned. CrossAmerica Partners LP is a midstream limited partnership engaged and specializing in the wholesale and retail distribution of motor oil products.  Similarly to REITs, registered oil and gas limited partnerships are required to remit 90% of profits to shareholders.

As a wholesaler, CrossAmerica Partners supplies wholesale gasoline to 1,800 stations in the US that are under the following brands: 

• Exxon 
• Mobil 
• Shell
• BP 
• Sunoco
• Phillips 66
• Citgo
• Valero

Additionally, CrossAmerica Partners supply fuel, food, car washes, and other convenience products and services to 250 US outlets under the following retail brands:

• Joe’s Kwik Marts
• Uni-Mart
• Hi-Miler Convenience Stores
• Stop In Food Stores
• Rocky Top Markets
• One Stop
• Zoomerz
• Wash & Roll

CrossAmerica also has partnerships with individual Dunkin’ Donuts, Arby’s and Subway locations.  Since CrossAmerica’s business model includes retail outlets, there is a real estate component to its operations, as well as branding and other concerns outside of the oil and gas industry. For example, Cross America Partners obtained 106 7-Eleven locations in May. It is rebranding them as Joe’s Kwik Marts outlets. It is also partnering its nationally recognized fuel brand supply clients to different Kwik Mart sites.

Frontline plc

Stock #9 :  Frontline plc (NYSE: FRO)

Shares for $10,000: 405.18

Yield: 10.35%

Annual Passive Income: ~$1,035

Cyprus registered Frontline plc is also in the crude oil tanker business. It was founded by shipping tycoon John Fredriksen in 1985, and is the 5th largest shipping company in the global oil tanker industry by revenue.

With a 76 vessel fleet, Frontline stock has nearly doubled since 2023. This price run is attributed primarily to the Panama Canal drought in early 2023, which drastically slowed down maritime traffic. Increased Chinese crude oil demand resulted in higher hauling prices from oil exporting nations like Brazil and Guyana, as well as the US.

In Q1 2024, Frontline reported a 16% revenue increase and anticipates stronger Asia oil demand in the latter half of the year. Share price YTD is already up over 30%.

Sixth Street Specialty Lending, Inc.

Stock #10 : Sixth Street Specialty Lending, Inc. (NYSE: TSLX)

Shares for $10,000: 472.14

Yield: 9.94%

Annual Passive Income: ~$994.00

Located in Dallas, TX.Sixth Street Specialty Lending is a BDC that provides senior secured loans, mezzanine debt, and structured equity or co-invested common stock equity finance for private companies. Its sweet spot is companies with a $50 million to $1 billion enterprise value with EBITDA of $10 million to $250 million.  

Sixth Street will provide qualified companies with $15 million to $350 million in finance for:

• Organic growth
• Acquisitions
• Market or Product Expansion
• Restructuring Initiatives
• Refinancing
• Recapitalization

Among its past or current clients are well known companies such as Avid Technologies, Bed, Bath & Beyond, Equinox, J.C. Penney, and Staples. 

Outfront Media, Inc.

Stock #11 : Outfront Media, Inc. (NYSE: OUT)

Shares for $10,000: 724.11

Yield: 8.78%

Annual Passive Income: ~$878.00

Although digital virtual advertising is the life’s blood of companies like Alphabet and Facebook, physical billboards, displays, and marketing exhibitions designed to catch the attention of passers-by are still a viable and lucrative platform. New York’s Outfront Media takes Madison Ave. advertising gestalt into new and innovative realms. 

From digital billboards with animation and 3-D effects to ads on street furniture, subway cars, and a host of other location specific advertising campaigns, Outfront Media combines the time-tested marketing fundamentals developed during the Mad Men era and combines them with cutting-edge state-of-the art technology and street culture savvy. Outfront Media boasts one of the largest and most diverse collections of billboard, transit and mobile assets for advertising in North America, and is among the industry leaders in Out Of Home (OOH) marketing.

Outfront Media’s wide reach into 150 markets in North America and the top 25 largest ones makes it a “go-to” industry agnostic advertising media company. The lack of sector pigeonholing gives Outfront Media a diversity of clientele that analysts have noted. Analysts from Citigroup, Barrington Research, Morgan Stanley and JP Morgan rate Outfront Media either a “buy” or a “hold”.

Passive income from dividend stocks may just be the ticket for many households trying to make ends meet. Nevertheless, prudent monitoring of news events or any market conditions that could affect the stock prices or dividend payments should be observed. Luckily, selling a stock and buying a replacement for it is a relatively simple task. The opportunities are there for those who take it seriously, and the rewards can be lucrative. 

Name:	Yield:	Annual Passive Dividend Income:
Petróleo Brasileiro S.A. – Petrobras (NYSE: PBR)	20.14%	~$2,014
Hafnia Limited (NYSE: HAFN)	18.05%	~$1,805
MFA Financial, Inc. (NYSE: MFA)	12.82%	~$1,282
CVR Partners, LP (NYSE: UAN)	12.57%	~$1,257
WhiteHorse Finance, Inc. (NASDAQ: WHF)	11.80%	~$1,180
New Mountain Finance Corporation (NASDAQ: NMFC)	11.05%	~$1,105
Calamos Convertible and High Income Fund (NASDAQ: CHY)	10.77%	~$1,077
CrossAmerica Partners LP (NYSE: CAPL)	10.42%	~$1,042

Frontline plc (NYSE: FRO)	10.35%	~$1,035
Sixth Street Specialty Lending, Inc. (NYSE: TSLX)	9.94%	~$994.00
Outfront Media, Inc. (NYSE: OUT)	8.78%	~$878.00
Total:		$13,669

 

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