Investing

5 Ultra-Yield Dividend Stocks to Buy Hand Over Fist

Lee Jackson

Published: July 1, 2024 7:56 am

24/7 Insights

• Ultra-yield stocks can deliver among the highest passive income streams.
• Compared to junk bonds, ultra-yield stocks may be a safer investment bet.
• Access 2 legendary, high-yield dividend stocks Wall Street loves.

Investors are drawn to dividend stocks, particularly the ultra-high yield variety, because they offer a significant income stream and the potential 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.

Dividend stocks are a favorite among investors for good reason. They provide a steady income stream and offer a promising avenue for total return. Total return is a comprehensive measure of investment performance that encompasses interest, capital gains, dividends, and distributions realized over time. 

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%. That is, 10% for the increase in stock price and 3% for the dividends paid.

We screened our 24/7 Wall St. ultra-yield dividend stock database, looking for the best companies investors with a higher risk tolerance should consider. Five companies that consistently deliver solid total return for shareholders make sense for those also looking for higher levels of passive income. Grab them now because when interest rates start to go down later this year, this asset class could be in big demand. 

Alliance Resource Partners

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This company is a leader in the thermal coal business, offers solid diversity, and a massive 11.39% 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

Annaly Capital Management

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This mortgage REIT has been around for years and is a top-income idea paying a huge 13.17% dividend. Annaly Capital Management Inc. (NYSE: NLY) is a diversified capital manager in mortgage finance and corporate middle-market lending.

The company invests in:

• Agency mortgage-backed securities
• Mortgage servicing rights
• Agency commercial mortgage-backed securities
• Non-agency residential mortgage assets
• Residential mortgage loans
• Credit risk transfer securities
• Corporate debts and other commercial real estate investments

Arbor Realty Trust

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This company trades at a ridiculous 8.1 times estimated 2024 earnings and pays a massive 12.72% dividend. Arbor Realty Trust (NYSE: ABR) invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States.

The company operates in two segments:

• Structured Business 
• Agency Business

Arbor Realty Trust primarily invests in:

• Bridge and mezzanine loans, including junior participating interests in first mortgages
• Preferred and direct equity and real estate-related joint ventures
• Real estate-related notes
• Various mortgage-related securities

The company offers:

• Bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property
• Financing by making preferred equity investments in entities that directly or indirectly own real property
• Mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction
• Junior participation financing in the form of a junior participating interest in the senior debt
• Financing products to borrowers seeking conventional, workforce, and affordable single-family housing

Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs.

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 staggering 13.58 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.

Four Favorite Ultra-High-Yield Dividend Stocks to Buy in June

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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