After years of a low-interest rate environment, which has reversed significantly over the last 22 months but is again trending higher, many investors continue to turn to equities for growth potential and solid and dependable dividends that help provide an income stream. What this equates to is total return, which is one of the most potent investment strategies.
We always like to remind our readers about the impact total return has on portfolios because it is one of the best ways to help improve the chances for overall investing success. Again, total return is the combined increase in a stock’s value plus dividends. For instance, if you buy a stock at $20 that pays a 3% dividend, and it goes up to $22 in a year, your total return is 13%—10% for the increase in stock price and 3% for the dividends paid.
We screened our 24/7 Wall St. dividend equity research database, looking for stocks that pay massive dividends, and we found two top companies that passive income investors should grab right now. While not suitable for all, those with a higher risk tolerance can buy either stock and receive huge dividends that are paid monthly for one and are just starting to take off for the other.
Armour Residential REIT
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This company slashed its dividend by 40% to $0.24 from $0.40 but still pays investors a massive 14.84% monthly. Armour Residential REIT Inc. (NYSE: ARR) invests in residential mortgage-backed securities (MBS) in the United States.
The company’s securities portfolio primarily consists of:
- United States Government-sponsored entities (GSE) and the Government National Mortgage Administration’s issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans
- Unsecured notes and bonds issued by the GSE and the United States treasuries
- Money market instruments.
It also invests in other securities backed by residential mortgages for which a GSE or government agency does not guarantee principal and interest payment. The company has elected to be taxed as a real estate investment trust under the Internal Revenue Code. As a result, it would not be subject to corporate income tax on that portion of its lowered net income that is distributed to shareholders.
If investors buy $20,000 at the current $17.90 price, that would generate $3217 per year in passive income.
Investors concerned over the significant cut in Armour Residential REIT dividend back in December may want to consider a company that hasn’t announced the first dividend it will pay, as it was an initial public offering last year. (Check out the five highest-yielding S&P 500 stocks to buy and hold forever.)
Mach Natural Resources
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This recent IPO trades below the initial offering price and will pay an estimated 16% dividend. Mach Natural Resources L.P. (NYSE: MNR) is an independent upstream oil and gas company focused on the acquisition, development, and production of oil, natural gas, and natural gas liquids reserves in the:
- Anadarko Basin region of Western Oklahoma
- Southern Kansas, and
- The panhandle of Texas.
The analysts at Raymond James noted that the company is led by Tom Ward, Co-Founder of Chesapeake Energy; Mach is another entrant into the E&P MLP space. MNR is a pure-play operator in the Anadarko Basin, leveraging its strong position (1 million net acres) to become the primary consolidator in the region.
Mach’s midstream position and lower base decline (~20%) allow the company to target a lower reinvestment rate (~30%) relative to the overall industry.
Mach says it intends to pay a dividend – a cash distribution. According to the prospectus, Mach estimates a dividend of $3.52 annualized per unit for the four quarters ending June 30, 2024.
This was the data that came in the prospectus for the IPO. The dividend at the $19 price was equal to an 18.50% yield. Given that the stock is below the IPO price, that figure could drop when the company announces the first dividend in February. So, even if reduced to $3.25 annually, that will still be an 18.15% dividend.
If investors buy $20,000 at the current $17.90 price, that will generate $3630 per year in passive income.
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