Investing

4 Ultra-High-Yield Stocks Yielding at Least 10% Are Our Top December Picks

Lee Jackson

Published: November 29, 2024 12:18 pm

Key Points

• The Federal Reserve will have lowered rates by 1% by year-end.
• If inflation edges higher, the Fed may pause in early 2025.
• Ultra-high-yield stocks can complement a well-rounded portfolio; a financial advisor can help with those goals. You can find one here with one click.

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.

The more passive income can help cover costly and rising costs like mortgage, insurance, taxes, and other expenses, the easier it is for investors to put away money for future needs as they build to retirement.

Conservative investors with lower risk tolerance often stick with quality blue-chip dividend leaders. Still, many looking for higher passive income streams love stocks with double-digit dividends and solid growth potential. We have four stocks that are our 24/7 Wall St. top ultra-high-yield picks for November: two are business development companies, two are top energy master limited partnerships, and all four are rated Buy at top Wall Street firms,

Why do we cover ultra-high-yield stocks?

While not suited for everybody, those trying to build solid passive income streams can do extremely 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 passive income streams that can make a significant difference.

Barings BDC

This business development company is an industry leader and pays a massive 10.70% dividend. Barings BDC Inc. (NYSE: BBDC) is a publicly traded, externally managed investment company elected to be treated as a business development company under the Investment Company Act 1940.

It seeks to invest primarily in:

• Senior secured loans
• First lien debt
• Unitranche
• Second lien debt
• Subordinated debt
• Equity co-investments
• Senior secured private debt investments in private middle-market companies operating across various industries

The company specializes in:

• Mezzanine
• Leveraged buyouts
• Management buyouts
• ESOPs
• Change of control transactions
• Acquisition financings
• Growth financing
• Recapitalizations in lower-middle market, mature, and later-stage companies

Barings BDC invests in manufacturing and distribution, business services and technology, transportation and logistics, and consumer products and services. It invests in the United States and companies with EBITDA of $10 million to $75 million, typically in private equity sponsor-backed investments.

FS KKR

This is a very well-known name on Wall Street. It offers a solid entry point at current levels and pays a massive 13.65 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 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 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% 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 note 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.

TXO Partners

With a massive 12.34% dividend and trading not far from a 52-week low, this company is a bargain at current levels. TXO Partners L.P. (NYSE: TXO) is an oil and natural gas company focusing on acquiring, developing, optimizing, and exploiting conventional oil, natural gas, and natural gas liquid reserves in North America.

Its acreage positions are concentrated in the Permian Basin of West Texas and New Mexico and the San Juan Basin of New Mexico and Colorado.

Back in June, Bob Simpson, the company’s board chair and chief executive officer, made a statement by purchasing 100,000 company shares. Trading at the stocks’ ridiculously cheap 9.5 times estimated 2025 earnings is a potential total return grand slam.

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