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. Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend.
With inflation staying very sticky and having the potential to move higher if President Trump’s tariffs are implemented across the board, it is more likely that the Federal Reserve may not lower rates again this year. Treasury Secretary Scott Bessent has stated that he would rather see the yield on the 10-year Treasury yield come down than lower the federal funds rate, which would be instrumental in lowering long-term borrowing costs for corporations. It should be noted that rates went higher as the Federal Reserve lowered them by 100 basis points or 1% last year.
With the prospect of rates staying somewhat static, buying quality ultra-high-yield stocks now looks like an incredible move for growth and income investors. Four of our favorite stocks are on sale and yield 12% or more.
Why do we cover ultra-high-yield stocks?
While not suited for everybody, those trying to build strong 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 create significant passive income streams.
Arbor Realty Trust
Arbor Realty Trust offers nationwide solutions for multifamily finance.
This company trades at a bargain of 8.2 times estimated 2025 earnings and pays a massive 12.51% dividend. Arbor Realty Trust (NYSE: ABR) invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.
The company operates in two segments:
- Structured Business
- Agency Business
Arbor Realty Trust primarily invests in:
- Bridge and mezzanine loans, including junior participating interests in first mortgages
- Preferred and direct equity and real estate-related joint ventures
- Real estate-related notes
- Various mortgage-related securities
The company offers:
- Bridge financing products to borrowers who seek short-term capital to be used in the acquisition of property
- Financing by making preferred equity investments in entities that directly or indirectly own real property
- Mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction
- Junior participation financing in the form of a junior participating interest in the senior debt
- Financing products to borrowers seeking conventional, workforce, and affordable single-family housing.
Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs.
Raymond James has an Outperform rating on the shares, with a $16 target price.
FS KKR
FS KKR is a publicly traded BDC that provides customized credit solutions to private middle-market U.S. companies.
This is a well-known name on Wall Street, offers a solid entry point at current levels, and pays a massive 12.05 dividend. FS KKR Capital Corp. (NASDAQ: FSK | FSK Price Prediction) 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, such as warrants or options, in connection with debt investments for additional consideration. It 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 and $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.
JPMorgan has a Hold rating and a $22 target price, and the stock has blown through that level to print a new 52-week high.
Mach Natural Resources
Mach Natural Resources is an independent upstream oil and gas company that acquires, develops, and produces oil, natural gas, and NGL.
This top energy company recently conducted a secondary offering, with the proceeds earmarked to pay down debt. Mach Natural Resources L.P. (NYSE: MNR) is an independent upstream oil and gas company that pays a massive 14.79 dividend and offers a tremendous entry point.
The company is focused on acquiring, developing, and producing oil, natural gas, and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas, and the Texas panhandle.
The company’s assets are located throughout Western Oklahoma, Southern Kansas, and the panhandle of Texas, and it consists of approximately 4,600 gross-operated PDP wells.
Additionally, it owns a portfolio of midstream assets supporting its leases, including ownership in four processing plants with a combined processing capacity of 353 million cubic feet per day and 1,210 miles of gas-gathering pipelines. Additionally, it owns water infrastructure consisting of 880 miles of gathering pipeline and 55 disposal wells.
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.
The Truist Financial analysts have a huge $24 target price with a Buy rating for the company.
TXO Partners
TXO Partners acquires, develops, optimizes, and exploits conventional oil, natural gas, and natural gas liquid reserves.
With a massive 12.62% dividend, this company is a bargain at current levels. TXO Partners L.P. (NYSE: TXO) is a master limited partnership focused on the acquisition, development, optimization, and exploitation of conventional oil, natural gas, and natural gas liquid (NGL) reserves in North America.
The company’s acreage positions are concentrated in:
- The Permian Basin of West Texas and New Mexico
- The San Juan Basin of New Mexico and Colorado.
Its assets comprise approximately 845,820 gross (371,796 net) leasehold and mineral acres located primarily in the Permian and San Juan Basin. Its assets include a 50% interest in Cross Timbers Energy, LLC.
As an operator, it designs and manages the development, completion, or workover for all the wells it operates and supervises daily operation and maintenance activities. It markets the majority of the natural gas, NGL, crude oil, and condensate production from the properties on which it operates. It also markets products produced by third-party working interest owners.
Last summer, Bob Simpson, the company’s board chair and chief executive officer, made a statement by purchasing 100,000 company shares.
Trading at a ridiculously cheap 9.8 times estimated 2025 earnings, the stock is a passive income winner and is a potential total return grand slam.
Truist Financial also has a Buy rating on this company’s shares and a $24 target price objective.
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