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Our 4 Top Ultra-High-Yield Dividend Picks for October and All Pay 12% and More
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24/7 Wall St. Insights
- Demand for ultra-high-yield dividend stocks is growing.
- Expect another 50 basis points in rate cuts by the end of the year.
- Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “7 Things I Demand in a Dividend Stock,” plus get our two best dividend stocks to own today. Access two legendary, high-yield dividend stocks Wall Street loves.
Investors are drawn to dividend stocks, particularly the ultra-high yield variety. These stocks offer a significant income stream and the potential for massive total returns. In the context of dividend stocks, total return includes the stock’s appreciation in value and the dividends it pays. This measure of return is a critical factor in their appeal.
At 24/7 Wall St., we consistently emphasize the potential of total return to our readers, as it is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return is the collective increase in a stock’s value plus dividends.
While the monster September jobs report dashed any hopes for another 50-basis-point rate cut in November, the reality is that by 2026, federal funds rate is expected to be 3.00% to 3.25%. That means that investors will look high and low for quality ultra-high-yield stocks, and we have tracked down four of our top 24/7 Wall St. picks for October. All are Buy-rated by top Wall Street firms and pay at least a 12% dividend.
Why do we cover ultra-high-yield stocks?
While only suited for some, those trying to build passive income streams can do exceptionally well with some of these top companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can use a barbell approach to get significant passive income streams.
Dynex Capital
Paying a hefty 13.38% 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 a
FS KKR
This is a well-known name on Wall Street, offers a solid entry point at current levels, and pays a massive 13.88% 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 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 and $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.
Mach Natural Resources
This 2023 IPO is trading below the initial offering price. Mach Natural Resources L.P. (NYSE: MNR) recently conducted a secondary offering to purchase more producing assets and will pay an estimated 13% or higher dividend.
Mach Natural Resources is an independent upstream oil and gas company focused on acquiring, developing, and producing oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, southern Kansas, and the Texas panhandle.
The analysts at Raymond James noted that Mach is led by Tom Ward, Co-Founder of Chesapeake Energy. Mach is another entrant into the E&P MLP space. It is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.
Mach’s midstream position and lower base decline (~20%) allow the company to target a lower reinvestment rate (~30%) relative to the overall industry. In addition, it is one of the only exploration and production companies organized as a limited partnership as it is an oil and gas producer.
Prospect Capital
Hedge funds love this top business development company, and the gigantic 13.71% 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 to favoring materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sect.
Four High-Yield Dividend Stocks Paying 6% and More Investors Always Forget
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