Investing

These 6 Ultra-High-Yield Stocks Are in Our Passive Income Hall of Fame

Lee Jackson

Published: August 28, 2024 6:50 am

24/7 Wall St. Insights

• Growth and Income investors with a higher risk tolerance love ultra-high-yield stocks.
• Demand for dividend stock will likely increase as interest rates come down.
• Snag this free report today: Access 2 legendary, high-yield dividend stocks Wall Street loves.

Investors love dividend stocks, especially the ultra-high yield variety, because they offer a significant income stream and have massive total return potential. 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.

Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

At 24/7 Wall St., we have focused on dividend stocks for over 15 years because, despite the ups and downs that always accompany the stock market, the reality for many people is the need to have solid passive income streams that accompany income from employment or other avenues. The more passive income can help cover rising costs like mortgage, insurance, taxes, and other fees, the easier it is for investors to put away money for future needs as they build to retirement.

We screened our 24/7 Wall St. ultra-high-yield dividend stock universe, and six top stocks reign as the champions, and all have a spot in our hall of fame. All are rated Buy at leading Wall Street firms, making sense for those seeking dependable passive income streams. In addition, take a look at this free report today.

Why are we covering this

Despite the rise in interest rates over the last two years, we still see persistent “sticky” inflation on many everyday items we must purchase. Those looking to enhance their earnings with passive income can benefit from stocks that pay dependable ultra-high-yield dividends.

Alliance Resource Partners

This company is a leader in the thermal coal business, offers solid diversity, and a massive 11.70% 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
• 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

Ares Capital

This high-yielding business development company (BDC) pays a massive 9.26% dividend. Ares Capital Corp. (NASDAQ: ARCC) specializes in 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 industries such as:

• Restaurants
• Retail
• Oil and gas
• Technology sectors

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.

British American Tobacco

This European giant continues to print money, has a vast product line, and pays a massive 8.24% dividend. British American Tobacco PLC (NYSE: BTI) offers these products to consumers:

• Vapor
• Tobacco heating
• Modern oral nicotine products
• Combustible cigarettes
• Traditional oral products, such as snus and moist snuff

The company offers its products under these brands:

• 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

Frontline

While off the radar of most investors, this shipping company could explode higher and pays a massive 9.86% 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 that 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 existing debt on the vessels, the transaction is expected to generate approximately $207 million in net cash proceeds.

The company expects to record a gain in 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 14.22 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.

Starwood Property Trust

This high-yielding company, run by real estate legend Barry Sternlicht, offers big-time total return potential and a 9.69% dividend. Starwood Property Trust Inc. (NYSE: STWD) operates as a real estate investment trust (REIT) in the United States, Europe, and Australia.

It operates through four segments:

• Commercial and Residential Lending
• Infrastructure Lending
• Property
• Investing and Servicing segments

The Commercial and Residential Lending segment:

• Originates, acquires, finances, and manages commercial first mortgages
• Non-agency residential mortgages
• Subordinated mortgages
• Mezzanine loans
• Preferred Equity
• Commercial mortgage-backed securities (CMBS)
• Residential mortgage-backed securities

The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments.

The Property segment primarily develops and manages equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment.

The Investing and Servicing segment:

• Manages and works out problem assets
• Acquires and contains unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions
• Originates conduit loans to sell these loans into securitization transactions and acquire commercial real estate assets, including properties from CMBS trusts

We Found Five Incredible Ultra-High-Yield Stocks Yielding 14% and More