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Want $3000 In Passive Income? Invest $4000 Into These Dividend Stocks

John Seetoo

Published: April 4, 2024 10:46 am

Investors who depend on income from their investments for at least some of their lifestyle expenses will also be impacted. The 4% CD yields from banks may soon disappear, and mortgage rates and other interest rate sensitive platforms will also feel the effect and drop commensurately.

In the financial world, real estate has long been a reliable source of passive income that has built fortunes for millions of people, with President Donald Trump being one of the more famous ones. However, real estate is capital intensive and relatively illiquid until a suitable buyer can be found if one needs to sell the property. For diversification purposes, Real Estate Investment Trusts (REIT) are a cost efficient way for investors to get a good portion of the income benefits from large real estate holdings without the management responsibilities and compliance issues that accompany the sector. For qualification as a Federally tax-exempt REIT under US law, the entity must pay out 90% of its income to shareholders, which makes for substantial passive dividend income.

We screened our 24/7 Wall St. dividend equity research database, looking for stocks that pay massive dividends, and we found a collection of companies that, combined, can generate over $3,000 a year in passive annual income if you invest just $4,000 in each stock at the time of this writing:

TriplePoint Venture Growth BDC Corp.

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• Stock # 1:  TriplePoint Venture Growth BDC Corp. (NYSE: TPVG)
• Yield: 16.28%
• Shares for $4,000: 406
• Annual Passive Income: ~ $651.20

As a Business Development Company (BDC), Menlo Park, CA headquartered Triple Point Growth BDC Corp. engages in a wide range of debt and equity financings for early-stage and venture capital-backed companies during their growth stages. 

Depending on use of proceeds, the financings can take the form of growth capital loans ($5-50 million range); equipment asset backed finance ($5-25 million range); revolving credit lines ($1-25 million range); and up to $5 million for direct equity investments. 

Triple Point’s preferred industrial sectors are in entertainment, technology, e-commerce, and life sciences, although there are exceptions. Within those categories, some of their client companies have been involved in: semiconductors, cybersecurity, wireless telecom and networking, software design, SaaS, biotech, biofuels, healthcare services, medical and surgical devices, and pharmaceuticals. 

Two Harbors Investment Corp.

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• Stock # 2 : Two Harbors Investment Corp. (NYSE: TWO)
• Yield: 14.05%
• Shares for $4,000: 312
• Annual Passive Income: ~ $562.00

While some REITs are hands-on owners and managers of brick-and-mortar real estate properties, there are others whose involvement remains solely on the financial side. This can manifest in underwriting loans or mortgages. Another type of REIT only deals in a third-party capacity as a fundlike entity in buying and selling securitized bundles of mortgage loans or other real estate predicated debt paper. Two Harbors Investment Corp. is a St. Louis Park, MN based REIT that is solidly in the last category.

Two Harbors’ portfolio holdings include: Federal agency mortgage-backed securities, collateralized fixed and/or floating mortgage loans, and other real estate based loans. 

One asset that is less common that Two Harbors actively trades are Mortgage Servicing Rights (MSR), which can be viewed as a mortgage derivative type of option that can transfer the rights and income streams from managing a specific mortgage or collection of mortgages. 

NexPoint Real Estate Finance, Inc.

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• Stock # 3: NexPoint Real Estate Finance, Inc. (NYSE: NREF)
• Yield: 13.76%
• Shares for $4,000: 277
• Annual Passive Income: ~ $550.40

An example of a REIT from the origination end of the spectrum, NexPoint Real Estate Finance is a Dallas, TX based company specializing in structuring, underwriting, and investing in commercial real estate loans. The configurations include first lien mortgages, mezzanine debt, convertible notes, multifamily residential property loans, convertible notes, preferred stock, and other types of real estate collateralized debt.

While NexPoint’s holdings are diversified across the US, it has a weighted preference towards Sun Belt states. The company also prudently manages its war chest. In its most recent earnings call, NexPoint disclosed that its portfolio is 89.9% stabilized with a 68.8% loan-to-value ratio. Its $1.3 billion of cumulative debt is collateralized by $1.7 billion in holdings with maturities of under six years. 

As a matter of policy, any NexPoint deals undertaken are normally only greenlit by the company if the ROI yield will be in the low to mid double figures, at a minimum. 

CBRE Clarion Global Real Estate Income Fund

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• Stock # 4: CBRE Clarion Global Real Estate Income Fund (NYSE: IGR)
• Yield: 13.74%
• Shares for $4,000: 763
• Annual Passive Income: ~ $549.60

Coldwell Banker Richard Ellis, better known by its acronym CBRE, is the largest commercial real estate services and investment firm in the US by 2023 sales revenues, according to MSCI (Morgan Stanley) Assets. Its different divisions and various funds have head offices in a number of cities. 

The CBRE Clarion Global Real Estate Fund operates out of Radnor, PA. Its focus is on the equity side of REIT instruments and brick-and-mortar properties, such as office buildings, hospitals, hotels, storage facilities, retail outlets, and apartment building complexes. 

Real Estate and REIT based public company stocks with strong upside and sizable annual income with operations in North America, Asia, Europe and Australia make up the balance of the fund’s portfolio.

Annaly Capital Management Inc.

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• Stock # 5: Annaly Capital Management Inc.. (NYSE: NLY)
• Yield: 13.24%
• Shares for $4,000: 203
• Annual Passive Income: ~ $529.60

Annaly Capital Management invests in both agency and non-agency mortgage-backed securities, securitized commercial property loans, and several real estate derivative products, such as mortgage servicing rights, to-be-announced forward contracts, and both agency and private label risk transfer securities.

A number of analysts have been following Annaly in the past few weeks due to its relatively low stock price-to-book value ratio, The fact that the Fed has halted the purchase of mortgage-backed securities for its agencies is expected to open more upside opportunities for Annaly in 2024 due to the decline of competitors bidding for MBS products that Annaly normally acquires for its own portfolio. Annaly Capital Management is based in New York City.

KKR Real Estate Finance Trust Inc.

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• Stock # 6 : KKR Real Estate Finance Trust Inc. (NYSE: KREF)
• Yield: 10.00%
• Shares for $4,000: 400
• Annual Passive Income: ~$400,00

Founded in the mid-1970s as a pioneer in the alternative asset class field, Kohlberg, Kravis Roberts, acronymed as KKR, has a history of high-profile, large acquisition deals. Immortalized in print and television in Barbarians at the Gate, which covered KKRs takeover of RJR Nabisco, KKR has continued in the private equity sector on an international basis. Some of their larger subsequent deals and investments included Macmillan Publishing, KinderCare Learning Centers, Wise Foods, and TXU, one of the largest buyouts in history.

KKR has a range of industrial sector divisions with separate management for each. Drawing from the capital markets, a number of them are also publicly traded. KKR Real Estate Finance Trust Inc. is KKR’s real estate finance arm. It originates and trades in senior loans for commercial real estate properties, both leveraged and unleveraged.

While these types of passive dividend yields are very attractive, over-weighting in one sector like real estate can be risky if there are adverse interest rate changes by the Federal Reserve or in the property and housing markets.  Diversification into other industries is often a prudent strategy. For a look at some other dividend stock options, you can try here.