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. For example, if you buy a stock at $20 that pays a 3% dividend and it rises to $22 in a year, your total return is 13%. That is, 10% for the increase in stock price and 3% for the dividends paid.
There are over 12,000 publicly traded stocks in the United States, and not even the most intelligent investors with the best tools can find every one at a moment’s notice. Many investors and traders typically keep a small list of key stocks they follow when looking for capital gains or ultra-high-yield dividends. We decided to screen our 24/7 Wall St. ultra-high-yield database, looking for obscure but solid companies yielding at least 10% with solid dividend coverage. Four well-run companies hit our screens, and all look like timely buys now.
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.
Horizon Technology Finance
Horizon is a venture lending platform that provides structured debt products to life science and technology.
Paying a gigantic 13.91% dividend, this stock has tremendous upside potential. Horizon Technology Finance Corp. (NASDAQ: HRZN) is a business development company specializing in lending and investing in development-stage investments.
It focuses on making secured debt and venture lending investments to venture capital-backed companies in these industries.
- Technology
- Life science
- Healthcare information and services
- Cleantech
- Sustainability
Horizon is a leading venture lending platform that offers structured debt products to life science and technology companies. Its experienced investment and operations team has provided debt capital to some of the most exciting companies for decades.
Collectively, the members of the Horizon team have originated and invested more than $5 billion in venture loans to thousands of companies. Since 2004, Horizon has directly originated and invested more than $3 billion in venture loans to more than 315 growing companies.
Kimbell Royalty Partners
Kimbell Royalty Partners acquires and owns mineral and royalty interests in oil and natural gas properties.
While a huge off-the-radar energy play for sure, this is a safe way to play the sector while getting huge 11.28% dividends. Kimbell Royalty Partners L.P. (NYSE: KRP) is an oil and gas mineral and royalty company. It owns mineral and royalty interests in over 17 million gross acres in 28 states and in onshore basins in the continental United States, including ownership in more than 130,000 gross wells with over 51,000 wells in the Permian Basin.
Its properties include:
- Permian Basin
- Mid-Continent
- Appalachian
- Eagle Ford
- Bakken
- Terryville/Cotton Valley/Haynesville
- DJ Basin/Rockies/Niobrara
The Permian Basin extends from southeastern New Mexico into West Texas. The Mid-Continent area contains fields in Arkansas, Kansas, Louisiana, New Mexico, Oklahoma, Nebraska, and Texas, as well as the Granite Wash, Cleveland, and Mississippi Lime formations.
The Appalachian Basin covers most of Pennsylvania, eastern Ohio, West Virginia, western Maryland, eastern Kentucky, central Tennessee, Western Virginia, northwestern Georgia, and northern Alabama.
The Eagle Ford shale formation stretches across south Texas.
KKR Real Estate Finance Trust
KKR Real Estate invests at scale around the world and across the capital structure.
This looks like a solid value idea, run by a Wall Street powerhouse and paying a big 10% dividend. KKR Real Estate Finance Trust Inc. (NYSE: KREF) is a mortgage real estate investment trust focusing primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets.
The company has elected to be taxed as a real estate investment trust. It would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Externally managed and advised by a KKR affiliate, the stock has seen some significant insider buying over the last few months. The largest purchase was by CEO Mathew Salem back in December.
KKR Real Estate Finance Trust posted solid fourth-quarter results and looks on track for a stellar 2025.
Stellus Capital
This business development company specializes in investments in private middle-market companies.
With a 10.91% yield and trading close to a 52-week high, this stock could break out in 2025. Stellus Capital Investment Corp. (NYSE: SCM) is an externally managed, closed-end, non-diversified management investment company that operates as a business development company.
Its investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through debt and related equity investments in middle-market companies.
Stellus Capital seeks to achieve its investment objective by originating and investing primarily in private United States middle-market companies (typically those with $5.0 million to $50.0 million of earnings before interest, taxes, depreciation, and amortization (EBITDA)) through a first lien, second lien, unitranche, and unsecured debt financing, with corresponding equity co-investments.
It invests in various sectors, such as:
- Services
- Healthcare and pharmaceuticals
- Consumer goods
- Media
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