With the youngest baby boomers (Americans born between 1946 and 1964) approaching retirement age, it is becoming increasingly important to focus on magnificent dividend stocks that will supply significant passive income either in or out of designated retirement accounts like IRAs.

While many seniors have enjoyed a long bull market over the past 35 years, there is a point when income becomes more critical than stock appreciation. The reason is simple: those who leave their careers to enjoy some well-deserved downtime lose the benefit of a regular salary and benefits associated with their jobs, like 401k matching. In addition, many baby boomers take advantage of their retirement years to travel and enjoy the rewards they have worked to achieve for a lifetime.

At 24/7 Wall St., we have followed dividend-paying stocks closely for over 15 years. With a growing audience of savvy baby boomers searching for safe income ideas that deliver more than the 10-year Treasury bonds’ 4.40% bi-annual dividend, we have closely screened hundreds of stocks looking for 10% dividend payouts and a degree of safety that allows for a good night’s sleep.

We screened our 24/7 Wall St. high-yield dividend stock database, looking for companies that pay a 10% or higher dividend that can be deemed safe for seniors. We considered the length of the dividends paid, the company’s length of business, and a host of other items that quantified the risk-reward for baby boomers.

While it must be noted that these stocks are not guaranteed like Treasury bonds and FDIC-insured high-yield money markets, those with a higher risk tolerance can deliver dependable passive income streams that, when combined with Social Security or pension payments, can make a huge difference.

Why do we cover ultra-high-yield stocks?

While only suited for some, those trying to build strong passive income streams can do extremely well having 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 make a significant difference.

Capital Southwest

Founded in 1961, this Dallas-based company pays a massive 11.13% dividend. Capital Southwest Corp. (NASDAQ: CSWC) is a business development company specializing in credit and private equity and venture capital investments in:

• Middle market companies
• Mezzanine
• Later stage, mature, late venture
• Emerging growth
• Buyouts
• Industry consolidation, recapitalizations, and growth capital investments

It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, or companies where significant senior management is departing.

In the lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyout situations.

The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. The company aims to invest in each industry segment in energy services and products, including upstream, midstream, and downstream, excluding exploration and production, focusing on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals.

Capital Southwest seeks to invest in the United States and North America. The firm aims to make investments ranging from $5 million to $25 million in securities. It leads $5 million to $75 million financings. Its Target holds are $5 million and $45 million, and the firm is willing to backstop up to $55 million with an active network of co-investors. It seeks to invest in the firm with a minimum EBITDA of $3 million and $25 million.

Goldman Sachs BDC

With the backing of one of the top investment banks in the world, and paying a huge 14% dividend, this is a stock that baby boomers with a higher risk tolerance should buy right now. Goldman Sachs BDC Inc. (NYSE: GSBD) is a business development company specializing in middle market and mezzanine investment in private companies.

It seeks capital appreciation through direct originations of secured debt, senior secured debt, junior secured debt, including first lien, first lien/last-out unitranche, and second lien debt, unsecured debt, including mezzanine debt, and, to a lesser extent, investments in equities.

The fund primarily invests in the United States. It seeks to invest between $10 million and $75 million in companies with EBITDA between $5 million and $75 million annually.

Morgan Stanley Direct Lending

Run by Wall Street giant Morgan Stanley, this company is scheduled to pay a 10% dividend in the future. Morgan Stanley Direct Lending (NYSE: MSDL) is a business development company (BDC) that aims to achieve attractive risk-adjusted returns by investing primarily in directly originated senior secured term loans issued by U.S. middle market companies.

The portfolio manager aims to run an extremely defensive portfolio focusing on Senior Secured, First Lien & Floating Rate loans. In the Morgan Stanley website for the fund, they note this for investors:

Our primary investment strategy is to make privately negotiated senior secured credit investments in U.S. middle-market companies that have leading market positions, enjoy high barriers to entry, generate strong and stable free cash flow, and are led by a proven management team with solid financial sponsor backing.

We invest primarily in companies backed by leading private equity sponsors with solid track records. Lending to sponsor-backed companies (versus non-sponsor-backed companies) has many distinct potential advantages.

We have created a defensive portfolio of investments, generally avoiding issuer or industry concentration to mitigate risk and achieve our investment objective. Our investment strategy is predicated on seeking to lend to companies in what we believe to be non-cyclical industry sectors.

Following an IPO in January 2024, the shares have traded as high as $24.18. They are back near the $20 level, and with a 10% dividend, the stock is a no-brainer buy now.

Starwood Property Trust

This high-yielding company, run by real estate legend Barry Sternlicht, offers big-time total return potential and a 9.97% 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

Here Is How to Protect Your Baby Boomer Retirement Portfolio for Free

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