Investors love dividend stocks, especially those with ultra-high yields, because they offer a significant income stream and have substantial 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. Then, imagine getting that dividend monthly instead of quarterly.
A monthly check from your stock portfolio makes sense for most people with bills and expenses due every 30 days, especially in a world where prices are consistently rising. Items such as mortgage payments, rent, utility bills, cell phone and internet bills, trash collection, and even grocery bills are always due each month. A steady stream of passive monthly income can greatly help meet these obligations.
Why do we cover monthly pay 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 employ a barbell approach to generate substantial passive income streams.
AGNC Investment
AGNC Investment Corp. (NASDAQ: AGNC | AGNC Price Prediction) provides private capital to the U.S. housing market and has paid solid monthly dividends for years. This real estate investment trust (REIT) in the United States enhances liquidity in the residential real estate mortgage market and facilitates home ownership in the United States.
The company invests primarily in agency residential mortgage-backed securities (agency RMBS) on a leveraged basis.
These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. government-sponsored enterprise, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the GSEs), or by a U.S. government agency, such as the Government National Mortgage Association (Ginnie Mae).
The company may also invest in other assets related to the housing, mortgage, or real estate markets.
Dynex Capital
Dynex Capital Inc. (NYSE: DX) is another internally managed mortgage REIT that invests in mortgage-backed securities (MBS). Dynex Capital finances its investments principally with repurchase agreements. Its objective is to provide attractive, risk-adjusted returns to its shareholders over the long term that reflect a leveraged, high-quality fixed-income portfolio focusing on capital preservation.
It seeks to provide returns to its shareholders primarily through the payment of regular dividends and through capital appreciation of its investments.
The company primarily invests in Agency MBS, of which over 97% are residential MBS (agency RMBS), including to-be-announced (TBA) securities. The remainder of its investment portfolio consists of agency commercial MBS (agency CMBS) and agency and non-agency CMBS interest-only (CMBS IO) securities.
Horizon Technology Finance
This venture lending platform provides life sciences and technology companies with structured debt products. With a gigantic 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 companies.
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 Technology Finance 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.
Oxford Square Capital
Oxford Square Capital Corp. (NASDAQ: OXSQ) is a closed-end, non-diversified management investment company. The firm’s investment objective is to maximize its portfolio’s total return. It seeks an attractive risk-adjusted total return by investing primarily in corporate debt securities and collateralized loan obligations (CLOs) that own corporate debt securities.
CLO investments may also include warehouse facilities, which are early-stage CLO vehicles designed to aggregate loans that can serve as the basis for a traditional CLO vehicle.
The company may also invest in publicly traded debt and/or equity securities.
Its portfolio of investments spans various industries, including:
- Aerospace and defense
- Business services
- Food and beverage
- Healthcare
- Industrials
- Materials
- Software
- Telecommunications services
- Structured Finance
- Information technology (IT) consulting
The company’s investment adviser is Oxford Square Management.
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