Investors love dividend stocks, especially the ultra-high-yield variety because they offer a significant income stream and have 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.
If inflation starts to trend higher this year, rate cuts are out of the question.
Cooling energy prices may be what keeps inflation trending where it is now.
Ultra-high-yield dividend stocks can help boost income in a big way.
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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.
While the massive 50% rally of the past two years has been a bonanza for investors, many top Wall Street strategists are starting to tap the brakes on the long-running rally as price-to-earnings (P/E) metrics have risen way above normal levels. The current S&P 500 P/E ratio is 28.78, up almost 2% from the previous quarter and 15% from the prior year. Based on the latest S&P 500 monthly data, the market is overvalued by a range of 103% to 170%. This despite moves higher off the recent 10% corrections lows.
We decided to screen our 24/7 Wall St. ultra-high-yield dividend database, looking for stocks trading under the $10 level that offer dependable dividends. Three stocks appear to be tremendous values at present.
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 use a barbell approach to create significant passive income streams.
This business development company is an industry leader. Barings BDC Inc. (NYSE: BBDC) is a publicly traded, externally managed investment company elected to be treated as a business development company under the Investment Company Act of 1940.
It seeks to invest primarily in:
The company specializes in:
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.
Run by one of the most prominent money managers in the world. Blackrock TCP Capital Corp. (NASDAQ: TCPC) is a business development company specializing in direct equity and debt investments in:
It typically invests in:
The company also prefers to invest in:
Blackrock TCP Capital also focuses on:
It seeks to invest in the United States. The fund typically invests between $10 million and $35 million in companies with enterprise values between $100 million and $1500 million, including complex situations. It prefers to make equity investments in companies for an ownership stake.
Way off the radar, this specialty company offers solid total return potential. Uniti Group Inc. (NASDAQ: UNIT) is an independent, internally managed real estate investment trust (REIT) engaged in the acquisition, construction, and leasing of mission-critical infrastructure in the communications industry.
The company is principally focused on acquiring and constructing fiber optic, copper and coaxial broadband networks and data centers.
The company’s lines of business include:
Uniti Leasing acquires and constructs mission-critical communications assets, such as fiber, data centers, next-generation consumer broadband, coaxial, and upgradeable copper, and leases them back to anchor customers on an exclusive or shared-tenant basis.
Uniti Fiber provides infrastructure solutions, including cell site backhaul and small cell for wireless operators and Ethernet, wavelengths, and dark fiber for telecommunications carriers and enterprises. The company owns approximately 1,40,000 fiber network route miles.
Why J.P. Morgan’s High-Yield Dividend ETF Is the Safest Way to Stay Invested Now
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