During the July meeting of the Federal Reserve, Christopher Waller and Michelle Bowman, both Trump appointees, voted against the central bank’s decision to leave interest rates unchanged—the first time two governors have dissented on a monetary policy decision in a single meeting since 1993. Federal Reserve Governor Michelle Bowman said last Saturday that she is looking at three interest rate cuts this year, given concerns about the strength of the job market and the overall U.S. economy. This follows the possibility of significant revisions to the jobs numbers, a process that many believe requires closer scrutiny. One thing is for sure: if they cut rates in September, November, and December, quality ultra-high-yield stocks could make parabolic moves higher.
At 24/7 Wall St., we have focused on dividend stocks for over 15 years. That is because, despite the stock market’s ups and downs, many people face the reality of needing solid passive income streams to supplement their income from employment or other sources. 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.
We screened our 24/7 Wall St. ultra-high-yield passive income stock database, looking for companies that pay supercharged dividends. Four companies look like great ideas for investors with a higher risk tolerance, and three of the four have Buy ratings from top Wall Street firms.
Why do we cover ultra-high-yield stocks?
While they are not suited for everybody, investors 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.
FS KKR
FS KKR Capital Corp. (NASDAQ: FSK | FSK Price Prediction) 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 specializes 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.
While the company posted disappointing numbers for the quarter, its stock has retreated to the lows in April after the big market sell-off. It bounced in a big way off the low then, and if it holds current trading levels, it is likely to trade back up into the $20+ range. In the meantime, shareholders will receive a giant dividend.
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.
Oppenheimer has a Perform rating with a $20 target price.
Invesco KBW High Dividend Yield Financial Portfolio ETF
While it is focused on the financial sector, this may be the home run as many across Wall Street are bullish on financials for the rest of 2025 and next year. Invesco KBW High Dividend Yield Financial Portfolio ETF (NASDAQ: KBWD) is based on the KBW Nasdaq Financial Sector Dividend Yield Index. The fund generally will invest at least 90% of its total assets in the securities of publicly listed financial companies with competitive dividend yields, in the United States, and that comprise the Index.
Keefe Bruyette & Woods compiles, maintains, and calculates the Index, which is a modified-dividend yield-weighted index of companies principally engaged in the business of providing financial services and products, as determined by the Index provider. The fund and the index are rebalanced and reconstituted quarterly.
Trading at just over 10 times forward earnings, with a price/book ratio of 1.21, this is a stellar buy for passive income-starved investors. It should be noted that the expenses are higher than those of many funds due to the fund’s specialized strategy. Toss in a 12.91% yield paid monthly, and investors have great total return potential.
There is a Buy rating on the fund, but we cannot determine from which firm.
MidCap Financial Investment
This top company was acquired and is managed by an entity controlled by Apollo Global Management in 2013. MidCap Financial Investment Corp. (NASDAQ: MFIC) is a closed-end, externally managed, diversified management investment company. The company’s investment objective is to generate current income and, to a lesser extent, long-term capital appreciation.
The company primarily invests in directly originated and privately negotiated first lien senior secured loans to privately held U.S. middle-market companies, which the company generally defines as companies with less than $75 million in EBITDA, as may be adjusted for market disruptions, mergers and acquisitions-related charges and synergies, and other items.
To a lesser extent, it may also invest in other types of securities, including:
- First lien unitranche
- Second lien senior secured, unsecured, subordinated
- Mezzanine loans
- Equities in both private and public middle market companies
MidCap Financial Investment has a low percentage of non-accrual loans, indicating strong portfolio health, and its floating-rate first-lien secured debt structure mitigates interest rate risk. The company’s merger with Apollo-managed funds has strengthened its balance sheet, and its payout ratio is sustainable. Analysts rate it favorably for its competitive fee structure and institutional-quality private credit access.
Truist Financial has a Buy rating and a $15 target price.
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 BDC. The company posted strong results for the quarter, and numerous firms across Wall Street raised their target price for the stock.
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, including the acquisition of equipment that is 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.
UBS has a Buy rating with a $17.50 target price.
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