24/7 Wall St. Insights

• The Federal Reserve went all in with a 50-basis-point rate cut.
• Dividend stocks will be in significant demand as rates drop.
• Passive income is simple: own quality dividends that pay you for doing nothing. Don’t miss out on our brand-new “7 Things I Demand in a Dividend Stock” report. It includes two A++ dividend stocks and how to spot future dividend winners that can put your returns on hyperdrive. Access two legendary, high-yield dividend stocks Wall Street loves.

These days, investors, especially those nearing retirement, seek passive income streams to supplement social security, pension income, or qualified retirement account withdrawals.

According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade or business in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved.

For the first time in over four years, the Federal Reserve lowered the benchmark federal funds rate by 50 basis points or one-half of one percent. While this is great news for growth and income investors holding or looking to buy high-yield dividend stocks, it is a clear sign that Fed Chair Jay Powell and the rest of the voting Fed governors are concerned about the state of the U.S. economy.

We screened our 24/7 Wall St. passive income stock database search for companies trading under $30 that offer some of the highest and safest dividends and came across five must-own stocks that make sense now. All are rated Buy at major Wall Street firms.

Why do we cover dividend stocks?

Dividend stocks provide investors with reliable streams of passive income. 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.

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.

CTO Realty Growth

With a sweet 7.87% dividend and solid upside potential, this REIT makes sense for passive income investors. CTO Realty Growth Inc. (NYSE: CTO) is a publicly traded real estate investment trust that owns and operates a portfolio of high-quality, retail-based properties located primarily in higher growth markets in the United States.

CTO also externally manages and owns a meaningful interest in Alpine Income Property Trust Inc. (NYSE: PINE), a publicly traded net lease REIT.

The company continues to invest in and expand its property and land holdings. During the three months ended June 30, 2024, CTO Realty Growth invested $1.5 million in 1.4 acres of land for future development within the West Broad Village property, which was previously acquired in October 2022.

During the six months ended June 30, 2024, the Company invested $72.5 million into two retail properties totaling 319,066 square feet, one vacant land parcel, and one $10.0 million first mortgage structured investment.

These investments represent a weighted average going-in cash yield of 8.2%.

CVR Energy

This Icahn Enterprises subsidiary is the perfect idea now, with oil way off the 52-week highs and paying shareholders a strong 8.36% dividend. CVR Energy Inc. (NYSE: CVI) engages in petroleum refining, marketing, and nitrogen fertilizer manufacturing activities in the United States with its subsidiaries.

It operates in two segments:

• Petroleum
• Nitrogen Fertilizer

The Petroleum segment refines and supplies gasoline, crude oil, distillate, diesel fuel, and other refined products. It also owns and operates a coking medium-sour crude oil refinery in southeast Kansas and a crude oil refinery in Wynnewood, Oklahoma, as well as supporting logistics assets. This segment primarily serves retailers, railroads, farm cooperatives, and other refiners/marketers.

The Nitrogen Fertilizer segment owns and operates a nitrogen fertilizer plant in North America that utilizes a pet coke gasification process to produce nitrogen fertilizer products and a nitrogen fertilizer facility in East Dubuque, Illinois, that produces nitrogen fertilizers in the form of ammonia and urea ammonium nitrate (UAN), nitric acid, and liquid and granulated urea.

This segment primarily markets UAN products to agricultural customers and ammonia products to agricultural and industrial customers.

Enterprise Products Partners

This company is one of the largest publicly traded energy partnerships and pays a 7.12% dividend. Enterprise Products Partners L.P. (NYSE: EPD) provides various midstream energy services, including:

• Gathering
• Processing
• Transporting and storing natural gas, natural gas liquids (NGL) fractionation
• Import and export terminalling
• Offshore production platform services

The company has four reportable business segments:

• Natural Gas Pipelines and Services
• NGL Pipelines and Services
• Petrochemical Services
• Crude Oil Pipelines and Services

Many analysts have always liked the stock because of its distribution coverage ratio, which is well above 1x. This makes the company relatively less risky in the MLP sector.

Starwood Property Trust

This high-yielding company, run by real estate legend Barry Sternlicht, offers big-time total return potential and a 9.24% 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

Five Highest-Yielding Dividend Kings That Passive Income Investors Can Hold for Decades

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