Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence. The more passive income can help cover rising costs, such as mortgages, insurance, taxes, and other expenses, the easier it is for investors to set aside money for future needs as they prepare for retirement. Dependable recurring dividends from quality, ultra-high-yield stocks are a recipe for success. For investors with a higher risk tolerance who are seeking over $13,000 in passive income per year, the five stocks in our $100,000 portfolio that trade under $20 each may be just the ticket.
We screened our 24/7 Wall St. under $20 dividend stock list, looking for companies that pay massive, double-digit, ultra-high-yield dividends, offering investors stability and dependability. Investing $20,000 in each of the five will generate over $13,000 in passive income every year, $13,055 to be exact. All five are for investors with a somewhat higher risk tolerance, and all five have a Buy rating from companies we cover on Wall Street. Share purchase amounts, dividends, and income paid are as of the time of this writing.
Why do we cover ultra-high-yield dividend stocks?
While not suited for everybody, those trying to build strong passive income streams can do exceptionally well with these five top companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can use a barbell approach to generate substantial passive income.
AGNC Investment
AGNC Investment (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. This company has paid solid monthly dividends for years and is currently yielding 13.80%.
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).
$20,000 will buy 1,900 shares, which pay $1.44 per year. That equals $2,735, and those dividends are paid monthly.
Wells Fargo has an Overweight rating with a $12 price target.
Ellington Financial
Ellington Financial (NYSE: EFC) has been at the forefront of data-driven investing since its founding in 1994, and it pays a rich 13% dividend. This high-quality mortgage real estate investment trust (REIT) company is a favorite among Wall Street investors. Through its subsidiary, Ellington Financial Operating Partnership, it acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States.
The company develops and manages residential mortgage-backed securities (RMBS) backed by:
- Prime jumbo
- Alt-A, manufactured housing, and subprime residential mortgage loans
- RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity
- Residential mortgage loans
- Commercial mortgage-backed securities
- Commercial mortgage loans and other commercial real estate debt
Ellington Financial also provides collateralized loan obligations, mortgage-related and non-mortgage-related derivatives, corporate debt and equity securities, corporate loans, and other strategic investments. The company offers consumer loans and asset-backed securities backed by consumer and commercial assets.
$20,000 will purchase 1,570 shares, each paying $1.56 per year. That totals $2,450.
Piper Sandler has an Overweight rating with a $14.50 target price.
Mach Natural Resources
Mach Natural Resources (NYSE: MNR) is an independent upstream oil and gas company with a whopping 15.6% dividend. The company is focused on the acquisition, development, and production of oil, natural gas, and natural gas liquid (NGL) reserves. It operates a diversified portfolio across the Anadarko, Permian, and San Juan Basins.
Mach Natural Resources assets are located throughout Western Oklahoma, Southern Kansas, and the panhandle of Texas and consist of approximately 5,000 gross operated proved developed producing wells.
Additionally, it owns a portfolio of midstream assets that support its leases, including ownership of four processing plants with a combined processing capacity of 353 million cubic feet per day (MMcf/d) and 1,480 miles of gas-gathering pipelines. It also owns water infrastructure consisting of 880 miles of gathering pipeline and 88 disposal wells.
$20,000 will purchase 1,565 shares, expected to pay shareholders $1.97 per year. That equals $3,085.
Stifel has a Buy rating with an $18 price target.
Starwood Property Trust
Starwood Capital is a well-established global investor with international investments across more than 30 countries and an affiliate of this high-yield company, which boasts a 10.90% dividend yield and is led by real estate legend Barry Sternlicht. Starwood Property Trust (NYSE: STWD) operates as a REIT in the United States, Europe, and Australia through four 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, while the Property segment primarily develops and manages equity interests in stabilized commercial real estate properties, including multifamily and net-leased commercial properties, held for investment purposes.
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
$20,000 will purchase 1,115 shares that pay $1.92 per year. That equals $2,140 in passive income.
Keefe, Bruyette & Woods has an Outperform rating and a $20 target price.
Trinity Capital
Trinity Capital (NASDAQ: TRIN) offers venture debt financing to high-growth, venture capital-backed startups. Based in Phoenix, this company also pays a massive 13.50% dividend. Trinity Capital is an internally managed, closed-end, non-diversified management investment company that operates as a business development company. It is a specialty lending company that provides debt, including loans and equipment financing, to growth-stage companies, including venture-backed companies and companies with institutional equity investors.
Its investment objective is to generate current income and capital appreciation through its investments across five vertical markets. It seeks to achieve its investment objective by making investments consisting primarily of term loans, equipment financings, working capital loans, equity, and equity-related investments. The company’s equipment financings involve loans for general or specific use, including the acquisition of equipment that is secured by the portfolio company’s equipment or other assets.
Trinity Capital invests in growth-stage companies, which are typically private and often backed by institutional investors.
$20,000 will buy 1,295 shares that pay $2.04 per year. That comes out to $2,645.
UBS has a Buy rating with a $17 target price.
Top Gaining Stocks
Top Losing Stocks