According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved. These days, investors, especially those nearing retirement, seek passive income streams to supplement their earnings, Social Security benefits, pension income, or qualified retirement account withdrawals. Adding a significant passive income stream can contribute to a safe and prosperous retirement.
Our 24/7 Wall St. passive income stock research database is a reliable source of the best investment ideas for generating passive income. We have identified four ultra-high-yield stocks with dividends paid quarterly. Investing $25,000 in each, totaling $100,000, will yield over $16,500 per year in passive income. As a caveat, these stocks are better suited for investors with a higher risk tolerance. However, all make sense for growth and income investors seeking to increase their total revenue stream. Our readers should note that these figures are as of the date we wrote this post and may vary slightly, either higher or lower, when published.
Why do we cover ultra-high-yield stocks?
While only suited for some, those trying to build solid passive income streams can do exceptionally well by 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.
AGNC Investment
AGNC Investment Corp. (NASDAQ: AGNC | AGNC Price Prediction) provides private capital to the U.S. housing market. This company has paid solid monthly dividends for years. It provides private capital to enhance liquidity in the residential real estate mortgage markets and, in turn, facilitate 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 a U.S. government-sponsored enterprise guarantees the principal and interest payments.
AGNC buys debt from 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 United States Government agency, such as the Government National Mortgage Association (Ginnie Mae).
$25,000 buys 2768 shares, which yield $1.44 per share each year. That will pay $3,986 in passive income.
FS KKR
FS KKR is a publicly traded business development company (BDC) that provides customized credit solutions to private middle-market U.S. companies. This is a well-known name on Wall Street, offering a solid entry point at current levels and paying a substantial dividend. FS KKR Capital Corp. (NASDAQ: FSK) is a BDC 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 opportunistically invest in corporate bonds and similar debt securities but 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 $10.0 million and $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.
Investing $25,000 would purchase 1,185 shares at current prices. So, $2.80 per year in dividends will generate $3,318 in income.
Mach Natural Resources
Mach Natural Resources L.P. (NYSE: MNR) is an independent upstream oil and gas company that acquires, develops, and produces oil, natural gas, and NGLs.
The company is focused on the acquisition, development, and production of oil, natural gas, and NGL reserves in the Anadarko Basin region, which spans Western Oklahoma, Southern Kansas, and the panhandle of Texas.
Mach Natural Resources assets are located throughout Western Oklahoma, Southern Kansas, and the panhandle of Texas and consist of approximately 5,000 gross operated proved developed producing wells.
Additionally, it owns a portfolio of midstream assets that support its leases, including ownership in four processing plants with a combined processing capacity of 353 million cubic feet per day, as well as 1,480 miles of gas-gathering pipelines. It also owns water infrastructure consisting of 880 miles of gathering pipeline and 88 disposal wells.
Despite missing Wall Street estimates, the company announced a massive $0.79 distribution for the quarter and reaffirmed its earnings outlook for the year. Based on the recent distribution increase, the company will pay $3.16 per year in dividends. Investing $25,000 now will buy 1,820 shares, which would yield a stunning $5,751 per year in passive income. It should be noted that Mach Natural Resources has a variable dividend policy, and the distribution may change.
Trinity Capital
Trinity Capital Inc. (NASDAQ: TRIN) offers venture debt financing to high-growth, venture capital-backed startups. Based in Phoenix, this company also pays a massive dividend. Trinity Capital is an internally managed, closed-end, non-diversified management investment company that operates as a business development company.
It is a specialty lending company that provides debt, including loans and equipment financing, to growth-stage companies, including venture-backed companies and companies with institutional equity investors.
Its investment objective is to generate current income and capital appreciation through its investments across five vertical markets. It seeks to achieve its investment objective by making investments consisting primarily of term loans, equipment financings, working capital loans, equity, and equity-related investments.
The company’s equipment financings involve loans for general or specific use. These include the acquisition of equipment secured by the equipment or other assets of the portfolio company.
Trinity Capital makes investments in growth-stage companies, which are typically private and often include those backed by institutional investors.
$25,000 will buy 1,706 shares. Paying $2.04 per year in dividends, this would generate $3,481 in passive income.
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