Investors love dividend stocks, especially the ultra-yield variety because they provide a significant income stream and give investors a great opportunity for massive total returns. 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.
For example, 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.
Many investors like to search for stocks that the crowd isn’t all following, and with good reason. When Wall Street and everybody pile into stocks and push the shares higher, the last ones often hold the proverbial short end of the stick. While that is far more likely with highly speculative companies, it can also happen to other stocks, especially Ultra-Yield companies.
We decided to screen our 24/7 Wall St. Ultra-Yield dividends stock universe, looking for companies with double-digit yields that many investors have yet to hear of. Five hit our search, and all are perfect for passive income investors with a higher risk tolerance. In addition, all are buy-rated on Wall Street.
Alliance Resource Partners
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This company is a leader in the thermal coal business, offers solid diversity, and a massive 14.18% yield. Alliance Resource Partners L.P. (NASDAQ: ARLP) is a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States.
The company operates through four segments:
- Illinois Basin Coal Operations
- Appalachia Coal Operations
- Oil & Gas Royalties
- Coal Royalties
It produces a range of thermal and metallurgical coal with sulfur and heat contents.
The company operates seven underground mining complexes in:
- Illinois
- Indiana
- Kentucky
- Maryland
- Pennsylvania
- West Virginia
In addition, it leases land and operates a coal loading terminal on the Ohio River at Mt. Vernon, Indiana, buys and resells coal, and owns mineral and royalty interests in approximately 1.5 million gross acres of oil and gas-producing regions, primarily in the Permian, Anadarko, and Williston Basins.
Further, the company offers various mining technology products and services, including:
- Data networks
- Communication and tracking systems
- Mining proximity detection systems
- Industrial collision avoidance systems
- Data and analytics software
Barings BDC
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This business development company is an industry leader and pays a massive 11.44% dividend. Barings BDC, Inc. (NYSE: BBDC) 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, and senior secured private debt investments in private middle-market companies operating across various industries.
It 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. It invests in manufacturing and distribution, business services and technology, transportation and logistics, and consumer products and services
It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor-backed.
FS KKR
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This is a well-known name on Wall Street, offers a solid entry point at current levels, and pays a massive 15.18% dividend. FS KKR Capital Corp. (NASDAQ: FSK) is a business development company specializing 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.
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 in connection with debt investments, such as warrants or options for additional consideration. It also 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 invest in corporate bonds and similar debt securities opportunistically.
The fund 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.
FS KKR seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It aims to exit from securities by selling them in a privately negotiated over-the-counter market.
Hercules Capital
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This highly regarded company across Wall Street pays a giant 10.63% dividend. Hercules Capital, Inc. (NYSE: HTGC) is the largest non-bank lender to venture capital-backed companies at all stages of development in a broadly diversified variety of technology, life sciences, and sustainable and renewable technology industries.
With two decades of experience in venture debt, Hercules is uniquely positioned to quickly create innovative financing solutions that perfectly fit within a company’s existing capital structure and map to its business objectives.
Recognized as the industry leader, Hercules understands the flexibility these companies need and has the experience to work closely with them, even during challenging times, to help them reach critical milestones.
Since its inception in December 2003, Hercules has committed more than $18 billion to over 640 companies and is the lender of choice for entrepreneurs and venture capital firms seeking growth capital financing.
Redwood Trust
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While operating in the mortgage business, this company is diversified and pays a hefty 10.46% dividend. Redwood Trust, Inc. (NYSE: RWT) and its subsidiaries are a specialty finance company in the United States. The company has three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio.
The Residential Mortgage Banking segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans.
The Business-Purpose Mortgage Banking segment operates a platform that originates and acquires business-purpose loans, such as single-family rental and bridge loans, for subsequent securitization, sale, or transfers into its investment portfolio.
The Investment Portfolio segment invests in:
- Securities retained from residential and business purpose securitization activities
- Residential and small-balance multifamily bridge loans
- Residential mortgage-backed securities issued by third parties
- Freddie Mac K-Series multifamily loan securitizations and
- Reperforming loan securitizations
- Servicer advance investments
- Home equity investments
- Other housing-related investments
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