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Investors love dividend stocks, especially the ultra-high yield variety, because they offer a significant income stream and massive 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.
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 key to making informed investment decisions.
We screened our 24/7 Wall St. ultra-high-yield dividend research database, looking for the best companies with dividend yields over 12%. We decided to look for companies with solid businesses with large moats to protect them from the competition. Four companies make the cut, and all are incredible ideas for investors seeking aggressive income ideas.
Why do we cover ultra-high-yield dividend stocks?
Ultra-high-yield dividend stocks provide investors with reliable streams of passive income. 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.
Annaly Capital Management
Annaly Capital Management is one of the largest mortgage real estate investment trusts.
This mortgage REIT has been around for years and is a top-income idea paying a vast 12.97% 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
Dynex Capital
Dynex Capital, a mortgage real estate investment trust, invests in mortgage-backed securities (MBS) on a leveraged basis.
Paying a hefty 13.09% dividend, Dynex Capital Inc. ( NYSE: DX ) is a passive income champion for more aggressive investors. It is a mortgage real estate investment trust that invests in mortgage-backed securities (MBS) on a leveraged basis in the United States.
It invests in agency and non-agency mortgage-backed securities (MBS), including residential, commercial, and interest-only securities. Agency MBS has a guarantee of principal payment by a U.S. government agency or a U.S. government-sponsored entity, such as Fannie Mae and Freddie Mac. Non-agency MBS has no such payment guarantee.
The company has qualified as a real estate investment trust for federal income tax purposes. It is generally not subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders as dividends.
FS KKR
FS KKR Capital provides customized credit solutions to private middle-market U.S. companies.
This is a well-known name on Wall Street that offers a solid entry point at current levels and pays a massive 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.
Trinity Capital
Trinity Capital provides venture debt financing for high-growth venture capital-backed startups.
Based in Phoenix, this business development company pays a massive 14.44% dividend. Trinity Capital Inc. ( NASDAQ: TRIN ) is a venture capital firm specializing in venture debt to growth-stage companies looking for loans and equipment financing.
The company is an internally managed business development company that is a leading provider of diversified financial solutions to growth-stage companies with institutional equity investors.
Trinity Capital's investment objective is to generate current income and, to a lesser extent, capital appreciation through investments, including term loans, equipment financings, and equity-related investments.
The firm believes it is one of only a select group of specialty lenders with a depth of knowledge, experience, and track record in lending to growth-stage companies.
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