Investors seeking substantial returns in the current financial landscape may find several high-yield dividend stocks appealing. The dividend yield on the S&P 500 is presently hovering around its historical low of approximately 1.2%. However, alternatives exist, with several stocks offering significantly greater yields, including those exceeding 10%. Here’s an exploration of three notable companies providing impressive dividend returns.
AGNC Investment boasts a remarkable yield of 13.6%, vastly surpassing the S&P 500. As a real estate investment trust (REIT), AGNC focuses on acquiring residential mortgage-backed securities (MBS) that are backed by government entities, such as Freddie Mac. This strategy allows the REIT to generate predictable, low-risk returns. To amplify its return potential, AGNC employs a leveraged investment approach primarily using repurchase agreements. Although this strategy can enhance profitability—currently, AGNC is realizing returns on equity in the mid-to-high teens—it also introduces a level of risk. While AGNC has consistently maintained its monthly dividend since early 2020, market fluctuations that adversely affect its returns could necessitate a dividend adjustment in the future.
Delek Logistics Partners follows closely with a yield of 10.1%. This master limited partnership (MLP) manages a diverse portfolio comprising midstream energy assets, including pipelines and storage facilities. These assets generate steady cash flow through long-term contracts, providing a solid foundation for its dividend payouts. Notably, the MLP is projected to generate sufficient cash to cover its dividend obligations by 1.3 times this year, adding a valuable buffer for growth-oriented investments. Recent expansions, such as the completion of its Libby 2 gas processing plant and acquisitions of additional infrastructure, have allowed Delek Logistics to extend its streak of 51 consecutive quarterly distribution increases.
Ares Capital Corporation rounds out the trio with a robust dividend yield of 9.6%. This business development company (BDC) specializes in equity and debt investments in private firms, maintaining a diversified portfolio that encompasses nearly 600 companies. Ares boasts an outstanding investment history, with no cumulative net realized losses since its inception. It distributes interest and dividend income generated from its investments through quarterly dividends, maintaining the same rate since 2022 and raising its payouts consistently for over 16 years. The BDC actively pursues new investment opportunities, leveraging strong relationships with banks and capital providers to secure additional funding. In the last quarter alone, Ares raised over $1 billion, committing approximately $3.9 billion to new investments across its portfolio.
The stocks of AGNC Investment, Delek Logistics Partners, and Ares Capital Corporation present compelling options for investors willing to accept higher risk for potential reward. Each firm not only offers significant yields but also incorporates strategies that have historically bolstered their dividend sustainability, making these stocks suitable considerations for income-driven portfolios.
