Investors love dividend stocks, especially those with ultra-high yields, because they provide 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. At 247 Wall St., we consistently emphasize the potential of total return to our readers. It is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return refers to the collective increase in a stock’s value, including dividends.
At 24/7 Wall St., we have focused on dividend stocks for over 15 years 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 trading under or near $10 that pay supercharged dividends. Five companies appear to be great ideas for investors with a higher risk tolerance, and four of the five have Buy ratings from top Wall Street firms.
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 employ a barbell approach to generate substantial passive income streams.
Barings BDC
Barings BDC Inc. (NYSE: BBDC) primarily makes debt investments in middle-market companies. This company is a leader in its industry and pays a substantial 11% dividend. Barings BDC is a publicly traded, externally managed investment company elected to be treated as a business development company under the Investment Company Act of 1940.
It seeks to invest primarily in:
- Senior secured loans
- First lien debt
- Unitranche
- Second lien debt
- Subordinated debt
- Equity co-investments
- Senior secured private debt investments in private middle-market companies operating across various industries
The company specializes in:
- Mezzanine
- Leveraged buyouts
- Management buyouts
- ESOPs
- Change of control transactions
- Acquisition financings
- Growth financing
- Recapitalizations in lower-middle market, mature, and later-stage companies
Barings BDC invests in manufacturing and distribution, business services and technology, transportation and logistics, and consumer products and services. It invests in the United States and companies with EBITDA of $10 million to $75 million, typically in private equity sponsor-backed investments.
The Bank of America price target is $10.
Horizon Technology Finance
This venture lending platform provides structured debt products to life sciences and technology companies. With a gigantic 19.30% dividend, this stock has tremendous upside potential. Horizon Technology Finance Corp. (NASDAQ: HRZN) is a business development company that specializes 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.
Maxim has a Buy rating with a $7.50 target.
Huntsman
Based in the United States, this chemical giant, which pays an 8.97% dividend, may be a huge total return home run. Huntsman Corp. (NYSE: HUN | WU Price Prediction) is a manufacturer of diversified organic chemical products. It operates through three segments:
- The Polyurethanes product segment includes methylene diphenyl diisocyanate, polyols, and thermoplastic polyurethane products.
- The Performance Products segment is engaged in the manufacturing and sale of amines and maleic anhydride, serving a variety of consumer and industrial end markets.
- Its Advanced Materials segment includes technologically advanced epoxy, phenoxy, acrylic, polyurethane, mercaptan, and acrylonitrile butadiene-based polymer products as well as carbon nanomaterials.
The products comprise different chemicals and chemical formulations, which it markets globally to a wide range of consumers, primarily industrial and building product manufacturers. The products are used in a range of applications, including adhesives, aerospace, automotive, coatings, construction, and others.
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 natural gas liquids (NGL). 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 pays a variable dividend, last reported at 17.50%.
Mach Natural Resources assets are located throughout the Anadarko Basin region and consist of approximately 5,000 gross operated proved developed producing wells. It also 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 last quarter, the company announced a massive $0.79 distribution for the quarter and reaffirmed its earnings outlook for the year.
Stifel has a Buy rating with a target price of $23.
Western Union
Western Union Co. (NYSE: WU) is a multinational financial services corporation based in the United States. While the demand for telegrams is long gone, the demand to transfer money is not, and this famous company has grown as a result. It pays a strong 11.10% dividend and trades at a ridiculous 6.1 times estimated 2025 earnings. Western Union offers global money transfer and payment services.
The company operates in two segments:
- The Consumer-to-Consumer segment facilitates international cross-border and intra-country money transfers, primarily through a network of retail agent locations, websites, and mobile devices.
- The Business Solutions segment offers payment and foreign exchange solutions, primarily for cross-border and cross-currency transactions, serving small and medium-sized enterprises, other organizations, and individuals. Additionally, it provides foreign currency forward and option contracts.
It also offers bill payment services that facilitate payments from consumers to businesses and other organizations, as well as offers money orders and other services.
Keefe Bruyette & Woods has a Market Perform rating with a $10 price objective.
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