Boomers Are Locking In These 3 Ultra-High-Yield Dividend Cash Cows for Life
A lender, a pipeline operator, and a tobacco company walk into a retirement portfolio, each promising to keep the income flowing no matter what the market throws at them. But how much stress can these payouts actually absorb before something…
Building an income from a portfolio takes three things: a large dividend, cash flow that covers it with room to spare, and a balance sheet that holds up in a downturn. This trio (a lender, a pipeline operator, and a tobacco company) delivers all three, led by a 10.2% yield from the largest publicly traded business development company. Let’s look at how safe each payout is.
Ares Capital: Double-Digit Income With a Spillover Cushion
Ares Capital (NASDAQ:ARCC | ARCC Price Prediction) yields 10.2%, paying $0.48 per share each quarter, or $1.92 a year. That puts it firmly in ultra-high-yield territory.
Dividend safety: Second-quarter core earnings of $0.47 per share came in a penny under the quarterly payout, but management said that “over the last 12 months, core earnings have exceeded our regular dividend,” with an extra $0.15 per share of net realized gains adding support. The bigger reserve is spillover income: Ares expects to carry forward about $988 million or $1.38 per share for future distributions. Leverage stands at 1.12x debt to equity net of cash, the middle of its 0.9x to 1.25x target range, backed by roughly $6 billion of liquidity. The company has maintained or increased its regular dividend for 68 consecutive quarters, and the $0.48 rate has held every quarter since early 2023.
Bull case: Business development companies pass most of their taxable income to shareholders, so Ares works like an income pipeline into 619 companies. Shares trade at $18.64, close to the $19.35 net asset value per share, with a forward P/E of 10. Borrowers grew EBITDA by about 8%, and new loan spreads widened 20 basis points.
Risk: Credit is normalizing. The cost of non-accruals rose to 2.4% from 1.8%, while net asset value (NAV) per share slid from $19.94 at the end of last year. That still trails the historical non-accrual average of roughly 3%.
Enterprise Products Partners: Pipeline Cash Flow Covering the Payout Nearly Twice
Enterprise Products Partners (NYSE:EPD) yields 6.04%, just over the ultra-high-yield line. The quarterly distribution is $0.56 per unit, or $2.24 annualized, up 2.8% year over year.
Dividend safety: Coverage is the highlight. Record operational distributable cash flow of $2.3 billion covered the cash distribution 1.9x, and over the past 12 months, Enterprise paid out just 56% of adjusted cash flow from operations. About 97% of its roughly $33.5 billion in debt is fixed-rate, with a weighted average cost of 4.7% and an average life of about 17 years. Net leverage is at its 3.0x target. The quarterly distribution has grown every year in the recent record, from $0.445 in 2020 to $0.56 today.
Bull case: Retained cash funds growth without new units. Enterprise has $6.5 billion of organic projects under construction, including two Permian gas plants, a new Mont Belvieu fractionator, and a liquefied petroleum gas (LPG) export expansion due by year-end. About 90% of its LPG export capacity is contracted. Co-CEO Jim Teague said, “Our outlook remains very constructive.” Units trade at a forward P/E of 11.
Risk: Enterprise is a master limited partnership, so unitholders receive a Schedule K-1 instead of a 1099. That complicates tax filing and can create problems when units are held in retirement accounts.
Altria: A Steady Raiser With Pricing Power Behind the Check
Altria (NYSE:MO) yields 5.57%, which makes it a high-yield name rather than an ultra-high-yield one. The latest quarterly dividend rose to $1.11 from $1.06, an annualized rate of $4.44.
Dividend safety: Against full-year adjusted EPS guidance of $5.61 to $5.72, the new annualized rate is about 78% to 79% of earnings. Debt-to-EBITDA stood at 1.9x, close to the roughly 2x target. Years of buybacks and dividends (rather than operating losses) have left shareholders’ equity negative at −$2.618 billion. CFO Heather Newman said, “Historically, after we have the dividend, we have about $1 billion excess in cash.” The record shows regular quarterly payments dating back to 1999, and the payout has increased each year from $0.86 to the current level.
Bull case: Altria has the pricing power that income investors want. Smokeable price realization was 4.5%, with an adjusted operating companies income (OCI) margin of 64.8%. Newman called the dividend “our primary vehicle” for shareholder returns. The stock trades at a forward P/E of 12 with a beta of 0.461, and the on! nicotine pouch brand reached 8.6% retail share.
Risk: Cigarette volumes keep shrinking. Industry volumes fell an estimated 5%, and discount brands gained 2.6 share points as consumers traded down.
Three Income Streams Built to Last
Each name backs its payout with a different buffer. Ares Capital has $1.38 per share of spillover income, Enterprise covers its distribution 1.9x, and Altria generates excess cash after paying its dividend. Together, they spread retirement income across private credit, energy infrastructure, and consumer staples, and each has a record of holding or raising its payout through full market cycles.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
