Investors love dividend stocks, especially those with ultra-high yields, because they provide a substantial income stream and offer significant 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 24/7 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.
There are over 12,000 publicly traded stocks in the United States; not even the most intelligent investors with the best tools can find them all immediately. Many investors and traders typically maintain a small list of key stocks they follow when seeking capital gains or ultra-high-yield dividends. We decided to screen our 24/7 Wall St. high-yield database, looking for companies yielding at least 8% with solid dividend coverage that are way too cheap and strong buys now. Five are perfect ideas now for growth and income investors, and all are Buy-rated at top Wall Street firms we cover.
Why do we cover high-yield dividend stocks?
High-yield dividend stocks offer investors a reliable source of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
Apple Hospitality REIT
Apple Hospitality REIT Inc. (NYSE: APLE | APLE Price Prediction) owns one of the largest portfolios of upscale, select-service hotels in the United States. Apple Hospitality REIT is a publicly traded real estate investment trust that pays a solid monthly 8.30% dividend and distinguishes itself through its unique offerings.
The company comprises 224 hotels with more than 30,066 guest rooms in 87 markets throughout 37 states, as well as one property leased to third parties.
Apple Hospitality REIT’s portfolio comprises 100 Marriott-branded hotels, 119 Hilton-branded hotels, and five Hyatt-branded hotels. They are operated and managed under separate management agreements with 16 hotel management companies, including:
- Hilton Garden Inn
- Hampton
- Courtyard
- Residence Inn
- Homewood Suites
- SpringHill Suites
- Fairfield
- Home2 Suites
- TownePlace Suites
- AC Hotels
- Hyatt Place
- Marriott
- Embassy Suites
- Aloft
- Hyatt House
Apple Hospitality hotels are in various states, including Alaska, Arizona, California, Colorado, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Michigan, and others.
Baird has an Outperform rating and a $13 target price.
Ares Capital
This business development company specializes in providing financing solutions for the middle market, garnering a Buy rating from 12 analysts and yielding a 9.84% dividend. Ares Capital Corp. (NASDAQ: ARCC) specializes in acquisitions, recapitalizations, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions for middle-market companies.
It also makes growth capital and general refinancing. It prefers to invest in companies engaged in basic and growth manufacturing, business services, consumer products, healthcare products and services, and information technology sectors. The fund will also consider investments in industries such as:
- Restaurants
- Retail
- Oil and gas
- Technology
It focuses on investments in the Northeast, Mid-Atlantic, Southeast, and Southwest regions from its New York office; the Midwest region from its Chicago office; and the Western region from its Los Angeles office.
The fund typically invests between $20 million and $200 million, with a maximum investment of $400 million, in companies with an EBITDA between $10 million and $250 million per year. It makes debt investments between $10 million and $100 million
The fund invests through:
- Revolvers
- First-lien loans
- Warrants
- Unitranche structures
- Second-lien loans
- Mezzanine debt
- Private high yield
- Junior Capital
- Subordinated debt
- Non-control preferred and common equity
The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically acquires stressed and discounted debt positions.
Ares Capital prefers to be an agent and lead the transactions in which it invests. The fund also seeks board representation in its portfolio companies.
Wells Fargo has an Overweight rating and a $21 target price.
Plains All American Pipeline
This stock has been locked in a tight trading range while offering a dependable 8.99% dividend yield. Plains All American Pipeline L.P. (NYSE: PAA) engages in the pipeline transportation, terminalling, storage, and gathering of crude oil and natural gas liquids (NGL) in the United States and Canada.
Its Crude Oil segment offers:
- Gathering and transporting crude oil through pipelines
- Gathering systems
- Trucks, barges, or railcars
- Terminalling, storage, and other facilities-related services and merchant activities
The Natural Gas Liquids segment provides:
- Gathering
- Fractionation
- Storage
- Transportation
- Terminalling activities
- Ethane, propane, normal butane, iso-butane, natural gasoline, and crude oil refining processes
Raymond James has a Strong Buy rating with a $22 target price.
Starwood Property Trust
Starwood Capital is a well-established global investor with international investments spanning over 30 countries and is an affiliate of this high-yielding company, which boasts a 10.90% dividend yield led by real estate legend Barry Sternlicht. Starwood Property Trust Inc. (NYSE: STWD) operates as a REIT in the United States, Europe, and Australia.
It operates through four segments:
- Commercial and Residential Lending
- Infrastructure Lending
- Property
- Investing and Servicing
The Commercial and Residential Lending segment:
- Originates, acquires, finances, and manages commercial first mortgages
- Non-agency residential mortgages
- Subordinated mortgages
- Mezzanine loans
- Preferred Equity
- Commercial mortgage-backed securities (CMBS)
- Residential mortgage-backed securities
The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments.
The Property segment primarily develops and manages equity interests in stabilized commercial real estate properties, including multifamily and net-leased commercial properties, held for investment purposes.
The Investing and Servicing segment:
- Manages and works out problem assets
- Acquires and contains unrated, investment-grade, and non-investment-grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions
- Originates conduit loans to sell these loans into securitization transactions and acquire commercial real estate assets, including properties from CMBS trusts
Keefe, Bruyette, and Woods has an Outperform rating and a $21 target.
Telus
This is an off-the-radar telecommunications and tech company with excellent upside potential and a strong 11.10% dividend. Telus Corp. (NYSE: TU) provides a range of telecommunications technology solutions, which include:
- Mobile and fixed voice and data telecommunications services and products
- Healthcare services
- Software and technology solutions
- Agriculture and consumer goods services, including software, data management, and data analytics-driven smart-food chain and consumer goods technologies, as well as digital experiences and related equipment
Data services include Internet protocol, television, hosting, managed information technology, cloud-based services, and home and business security and automation.
TELUS Digital, a subsidiary of the company, provides a portfolio of end-to-end, integrated capabilities, including:
- Digital solutions, such as cloud solutions and automation
- Trust, safety, and security services
- Artificial intelligence (AI) data solutions, including proficiency in computer vision, front-end digital design, and consulting services
Scotiabank has an Outperform rating and a U.S. dollar price target of $18.51.
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