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. The more passive income that can help cover rising costs—such as mortgages, insurance, taxes, and other expenses—the easier it is for investors to set aside money for future needs as they prepare for retirement. Dependable recurring dividends are a recipe for success.
Our 24/7 Wall St. passive income stock research database is a reliable source of the best investment ideas. We have identified three ultra-high-yield stocks that investors can purchase for just $5,000 each, for a total of $15,000, yet have the potential to generate almost $2,000 in passive income, a massive 13.34% on invested capital. Please note that this passive income portfolio is only suitable for those with somewhat higher risk tolerance.
Why do we cover ultra-high-yield dividend 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. This company has paid solid monthly dividends for years. It provides private capital to the U.S. housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating 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 U.S. government agency, such as the Government National Mortgage Association (Ginnie Mae).
$5,000 buys 517 shares, which pay $1.44 per share each year. That will total $517 in passive income.
Keefe, Bruyette, & Woods has an Overweight rating with a $10 target price.
TXO Partners
TXO Partners L.P. (NYSE: TXO) acquires, develops, optimizes, and exploits conventional oil, natural gas, and natural gas liquid reserves. With a massive dividend and trading not far from a 52-week low, TXO Partners is a bargain at current levels. The company 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
- San Juan Basin of New Mexico and Colorado
- Williston Basin of Montana and North Dakota
Its assets consist of approximately 1,117,628 gross (549,229 net) leasehold and mineral acres located primarily in the Permian Basin, San Juan Basin and Williston Basin. Its assets include a 50% interest in Cross Timbers Energy (Cross Timbers). As operator, it designs and manages the development, recompletion, or workover for all of the wells it operates. It also supervises operation and maintenance activities on a day-to-day basis. The company markets most natural gas, NGL, crude oil, and condensate production from the properties on which it operates.
A $5,000 investment would purchase 340 shares of the company. At $2.25 per share, this would deliver $765 in passive income each year.
Raymond James has a Strong Buy rating with a huge $24 target.
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, 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.
5,000 will buy 337 shares. Paying $2.04 per year in dividends, this would generate $688 in passive income.
UBS has a Buy rating with a $17.50 target price.
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