24/7 Insights
- Ultra-high-yield stocks can boost the chances of total return investing success.
- Generating passive income streams is enhanced when buying ultra-high-yield stocks.
- Access 2 legendary, high-yield dividend stocks Wall Street loves.
Investors are particularly fond of dividend stocks, especially the ultra-high-yield variety, as they can pave the way for total return investing success. This success is measured by the combination of interest, capital gains, dividends, and distributions realized over time. Essentially, the total return on an investment or a portfolio is a blend of income and stock appreciation.
Let’s take a closer look at the concept of total return. Imagine you purchase a stock at $20 that offers a 3% dividend. If the stock price rises to $22 within a year, your total return is 13%. This is calculated by adding the 10% increase in stock price to the 3% dividend. Understanding this calculation is critical to making informed investment decisions.
At 24/7 Wall St., we consistently cover companies that pay gigantic dividends and look for those that can safely maintain the hefty payouts to shareholders. We favor some over others as we look for who manages the portfolio and their track record over an extended period. We zeroed in on four stocks we have covered for some time, and all make sense for investors seeking big passive income with a higher risk tolerance level.
Why are we covering this?
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Despite the rise in interest rates over the last two years, we still see persistent “sticky” inflation on many everyday items we must purchase. Those looking to enhance their earnings with passive income can benefit from stocks that pay ultra-high-yield dividends.
British American Tobacco
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This European giant continues to print money and pays a massive 10.10% dividend.
British American Tobacco PLC (NYSE: BTI) offers:
- Vapor
- Tobacco heating
- Modern oral nicotine products
- Combustible cigarettes
- Traditional oral products, such as snus and moist snuff
The company offers its products under:
- Vuse
- Glo
- Velo
- Grizzly
- Kodiak
- Dunhill
- Kent
- Lucky Strike
- Pall Mall
- Rothmans
- Camel
- Natural American Spirit
- Newport
- Vogue
- Viceroy
- Kool
- Peter Stuyvesant
- Craven A
- State Express 555
- Shuang Xi brands
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 gigantic 14.49% 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.
Mach Natural Resources
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This 2023 IPO is trading below the initial price and will pay a reported gigantic 14% dividend based on estimates for the rest of the year. 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 Texas panhandle.
The analysts at Raymond James noted that Mach is led by Tom Ward, Co-Founder of Chesapeake Energy. Mach is another entrant into the E&P MLP space. It 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.
Starwood Property Trust
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This is a high-yielding company run by real estate legend Barry Sternlicht that offers big-time total return potential and a 10.14% dividend. Starwood Property Trust Inc. (NYSE: STWD) operates as a real estate investment trust (REIT) in the United States, Europe, and Australia.
It operates through four segments:
- Commercial and Residential Lending
- Infrastructure Lending
- Property
- Investing and Servicing segments
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, such as multifamily properties and commercial properties subject to net leases, that are held for investment.
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.
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