Investing

Want $21,000 In Passive Income? Invest $40,000 In These Dividend Stocks

John Seetoo

Published: April 10, 2024 12:59 pm

Last Updated: April 10, 2024 1:00 pm

Contrary to political accusations that retailers are “gouging customers”, the cost of goods has jumped due to the devaluation of the dollar from oversupply and government overspending. The real world effects of inflation are resulting in why household staples, like fuel, milk, eggs, toilet paper, and soap, have jumped in price over the same period. 

For many families whose budgets are already stretched to the limit, getting an extra job is not an option, especially since additional child care often is more expensive than that second paycheck. For those families with investible funds, another recourse is to switch into high yield dividend stocks, which can potentially provide both capital appreciation, but more importantly, passive dividend income, which may make the difference between hard choices about health, food, childcare and education. 

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 $21,000 a year in passive annual income if you invest just $40,000 in each stock at the time of this writing. 

Calamos Long/Short Equity & Dynamic Income Term Trust

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• Stock #1 : Calamos Long/Short Equity & Dynamic Income Term Trust  (NASDAQ: CPZ) 
• Yield: 11.98%
• Shares for $40,000: 2,604
• Annual Passive Income: ~$4,792

In general, “bulls” are described as people who think a security will appreciate, or go up in price, while “bears” are considered those who think a security will decrease, or drop in price. A “long” position is defined as when a security is being held, while a “short” position is when a security has been sold, usually by borrowing the stock, in order to buy it back at a lower price to lock in the profit. The mechanics of “shorting” a market were depicted in the Eddie Murphy and Dan Aykroyd comedy Trading Places, where they short orange juice futures at the top of the market and buy them back when the price plummets down.

While the vast majority of managed funds tend to go long in the market, there are some who see opportunities in overbought securities. In a unique hybrid of strategies, the Naperville, IL based Calamos Long/Short Equity & Dynamic Income Term Trust combines them for augmenting their dividend and portfolio growth.

Advent Convertible and Income Fund

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• Stock #2 :  Advent Convertible and Income Fund (NYSE: AVK)
• Yield: 11.86%
• Shares for $40,000: 3,369
• Annual Passive Income: ~$4,744

Guggenheim Investments is a $231 billion asset management firm headquartered in New York City, and was founded by the wealthy Guggenheim family, best known for its landmark Upper East Side art museum designed by architect Frank Lloyd Wright. It presently has the Advent Convertible and Income Fund under its auspices. Advent was founded in 1995 by the former convertible bond department head of Merrill Lynch. 

Convertible bonds are bonds that carry an option for the holder to convert to common stock. While they usually pay less interest than non-convertible bonds from the same issuer, investors often will buy the convertible bonds to collect income while waiting for the company to announce a significant earnings or news events that will drive the stock price up, at which point, the investors would exercise the convert option and ride the stock price up.

Advent Convertible and Income Fund allocates about 60% of its portfolio towards convertibles with the remainder in high-yield nonconvertible “junk” bonds. 

Vodafone Group Public Limited Company

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• Stock #3 : Vodafone Group Public Limited Company (NASDAQ: VOD) 
• Yield: 11.17%
• Shares for $40,000: 4,530
• Annual Passive Income: ~$4,468

Ranked #3 in the UK by subscribers (18.5 million), Newbury based Vodafone Group Public Limited Company is a full service telecommunications company also operating in Europe and Africa. In addition to mobile phones, they provide broadband, WiFi, data, cloud, IT, hosting, AI, IoT, WAN, LAN, ethernet, and other communications related functions for private and public customers.

Vodafone also provides drone detection and encrypted SATCOM for UK Ministry of Defence and law enforcement.

Additionally, Vodafone has a robust finance division for business and merchant services, as well as insurance and, notably, M-Pesa, an African mobile money management system for access to payment facilitation and other financial services.

PennyMac Mortgage Investment Trust

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• Stock #4 : PennyMac Mortgage Investment Trust (NYSE: PMT) 
• Yield: 11.16%
• Shares for $40,000: 2,787
• Annual Passive Income: ~$4,464

A Real Estate Investment Trust (REIT) must disburse 90% of profits in order to satisfy their tax exemption status. That said, REITs can engage in a variety of activities, from plain vanilla third party buying of Federal agency guaranteed bonds, like Freddie Mac or Fannie Mae, to direct mortgage underwritings, to a host of other activities in both the residential and commercial real estate sectors. 

PennyMac Mortgage Investment Trust, based in Westlake Village, CA, takes a more aggressive approach.

Under its Credit Sensitive Strategies segment, PennyMac engages in Credit Risk Transfer swaps, CRT securities, subordinate mortgage-backed securities, distressed loans, and direct real estate finance. CRT swaps provide a vehicle for agencies like Freddie Mac to offload risk.

PennyMac’s Interest Rate Sensitive Strategies division handles agency and non-agency senior mortgage-backed securities, mortgage servicing rights, interest rate spreads, and hedging strategies.

The Correspondent Production arm acquires, pools, and resells mortgages or securitizes them for sale to government sponsored entities. PennyMac is presently the largest US correspondent lender of mortgages. 

SLR Investment Corp.

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• Stock #5 : SLR Investment Corp. (NASDAQ: SLRC) 
• Yield: 10.79%
• Shares for $40,000: 2,614
• Annual Passive Income: ~$4,316

A New York Business Development Company, SLR Investment Corp. is an industry agnostic finance company that is more transactionally focused. The company provides debt finance in the form of secured first or second lien loans, subordinated debt, mezzanine loans, and minority equity stakes for midland upper-middle market US companies. 

The transactional areas SLR will support are: 

1) sponsor finance 

2) cashflow solutions 

3) equipment purchase finance 

4) working capital

5) life science finance for late stage drug, device, diagnostic, and healthcare IT development

6) equipment leasing

7) manufacturing, service, and business credit

8) healthcare product asset-backed loans

SLR Investment Corp.’s sweet spot is $5 million to $100 million per transaction for qualifying companies with $15 million to $100 million EBITDA on $50 million to $1 billion in revenues. Average maturity of financings are three years.

Passive dividend income is an excellent way to supplement a household budget’s shortfall. Of course, it is important to monitor any stock investments for news and market activity that can affect both price as well as dividend amounts. Otherwise, it is a relatively pain-free and time efficient way to help make ends meet.