Investors love dividend stocks, especially those with high yields, because they provide a substantial passive income stream and offer significant total return potential. 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. At 24/7 Wall St., we consistently emphasize the potential of total return to our readers. It is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return refers to the collective increase in a stock’s value, including dividends.
We decided to screen our 24/7 Wall St. low-priced dividend stock database, looking for companies that yield 10% or more but are always forgotten by growth and income investors. Five stocks have caught our attention, and once our readers realize they’ve also overlooked them, it might be time to take a closer look. While not suited for everybody, those trying to build strong passive income streams can do exceptionally well with some of these top companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can employ a barbell approach to generate substantial passive income streams.
Why do we cover high-yield dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciation has contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations. A study by Hartford Funds, in collaboration with Ned Davis Research, found that dividend stocks delivered an annualized return of 9.18% over the 50 years from 1973 to 2023. Over the same timeline, this was more than double the annualized return for non-payers (3.95%).
AGNC Investment
AGNC Investment Corp. (NASDAQ: AGNC) provides private capital to the U.S. housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the United States. This company has paid a solid monthly dividend, currently yielding 14.30%, for years.
The company invests primarily in agency residential mortgage-backed securities (Agency RMBS) on a leveraged basis.
These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations for which a U.S. government-sponsored enterprise guarantees the principal and interest payments.
AGNC buys debt from the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Together, Fannie Mae and Freddie Mac are known as the GSEs, or government-sponsored enterprises. Alternatively, AGNC may purchase debt from a U.S. government agency, such as the Government National Mortgage Association (Ginnie Mae).
Barings BDC
Barings BDC Inc. (NYSE: BBDC) primarily makes debt investments in middle-market companies. This business development company (BDC) is a leader in its industry and pays a substantial 12.10% dividend. It is a publicly traded, externally managed investment company elected to be treated as a BDC 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
- Senior secured private debt investments in private middle-market companies operating across various industries
The company 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
Barings BDC invests in manufacturing and distribution, business services and technology, transportation and logistics, and consumer products and services. It invests in the United States and companies with EBITDA of $10 million to $75 million, typically in private equity sponsor-backed investments.
The Bank of America price target is set at $10.
Hooker Furnishings
While way off the radar, this company is the largest supplier of case goods and upholstery in the U.S., and it pays a solid 9.23% dividend. Hooker Furnishings Corp. (NASDAQ: HOFT) is a designer, marketer, and importer of case goods (wooden and metal furniture), leather furniture, fabric-upholstered furniture, lighting, accessories, and home decor for the residential, hospitality, and contract markets.
Its segments include:
- Hooker Branded
- Home Meridian
- Domestic Upholstery
The Hooker Branded segment, which includes two businesses:
- Hooker Casegoods, which covers a range of design categories and includes home entertainment, home office, accent, dining, and bedroom furniture in the upper-medium price points sold under the Hooker Furniture brand.
- Hooker Upholstery, which includes imported upholstered furniture targeted at the upper-medium price range.
The Home Meridian segment includes Pulaski Furniture, Samuel Lawrence Furniture, Prime Resources International, and Samuel Lawrence Hospitality.
The Domestic Upholstery segment includes Bradington-Young, HF Custom, Shenandoah Furniture, and Sunset West operations.
Huntsman
Like many chemical companies, this stock has had a challenging year; however, it appears poised for a rebound with a 10.70% dividend yield. Huntsman Corp. (NYSE: HUN) is a manufacturer of diversified organic chemical products.
It operates through three segments:
- Polyurethanes
- Performance Products
- Advanced Materials
The Polyurethanes product segment includes methylene diphenyl diisocyanate, polyols, and thermoplastic polyurethane products.
The Performance Products segment is engaged in the manufacturing and sale of amines and maleic anhydride, serving a variety of consumer and industrial end markets.
Huntsman’s Advanced Materials segment includes technologically advanced epoxy, phenoxy, acrylic, polyurethane, mercaptan, and acrylonitrile butadiene-based polymer products as well as carbon nanomaterials.
The company’s products comprise different chemicals and chemical formulations, which it markets globally to a wide range of consumers, primarily industrial and building product manufacturers. Its products are used in a range of applications, including adhesives, aerospace, automotive, coatings, construction, and others.
Western Union
Western Union Co. (NYSE: WU) is a multinational financial services corporation based in the United States. While the demand for telegrams is long gone, the demand to transfer money is not, and this famous company has grown as a result. It pays a strong 11.70% dividend and is a provider of cross-border, cross-currency money movement, payments, and digital financial services, empowering consumers, businesses, financial institutions, and governments.
Its Consumer Money Transfer segment facilitates money transfers, which are primarily sent from its retail agents and owned locations worldwide, as well as through websites and mobile devices. Its money transfer service is provided through one interconnected global network. This service is available for international cross-border transfers and, in certain countries, intra-country transfers.
The Consumer Services segment includes the company’s bill payment services, money order services, retail foreign exchange services, media network, prepaid cards, lending partnerships, and digital wallets. The company provides its services primarily through a network of agent locations in more than 200 countries and territories.
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