In today’s low interest rate environment, generating substantial dividend income requires investing in stocks with above-average yields. While high yields can sometimes be a sign of danger or excess risk, ultra-high-yield stocks in the financial sector with strong underlying businesses can provide excellent income potential along with growth and relative safety.
By investing $17,650 in a select group of 5 financial sector stocks with yields ranging from 10-13%, you can generate approximately $2,000 in annual dividend income. Here are 5 ultra-high-yield financial stocks to consider for your dividend portfolio:
1. New York Mortgage Trust (NYMT)
Current Yield: 13.4%
New York Mortgage Trust is a real estate investment trust (REIT) focused on managing and acquiring mortgage-related assets. The company originates and invests in residential mortgage loans, mortgage-backed securities, distressed residential loans, and multi-family commercial mortgage loans. With the U.S. housing market remaining strong, NYMT is well-positioned to capitalize on mortgage lending and real estate investment opportunities.
NYMT currently pays an attractive quarterly dividend of $0.10 per share, giving the stock a yield of 13.4%. At its current share price of around $7.50, an investment of $3,000 in NYMT would purchase 400 shares and generate $160 per quarter or $640 per year in dividend income.
2. Apollo Commercial Real Estate Finance (ARI)
Current Yield: 11.1%
Apollo Commercial Real Estate Finance is a real estate investment trust that primarily originates, acquires, and manages commercial mortgage loans and other commercial real estate-related debt. Its portfolio consists of office, retail, hotel, and multifamily properties located across the U.S.
The company has a strong track record of consistent dividend growth since listing in 2009. It currently pays a quarterly dividend of $0.35 per share, giving it a yield of 11.1%. An investment of $3,000 would buy around 128 shares of ARI and produce $140 per quarter or $560 per year in dividends.
3. AGNC Investment Corp (AGNC)
Current Yield: 11.7%
AGNC Investment Corp is a mortgage REIT that invests primarily in residential mortgage pass-through securities and collateralized mortgage obligations sponsored by Fannie Mae, Freddie Mac, and Ginnie Mae. The company generates income from the interest payments on these real estate securities.
With the Fed committed to lowering interest rates, AGNC stands to benefit from declining financing costs. The company has an attractive dividend payout ratio of just 88% of its earnings. The monthly dividend currently stands at $0.16 per share, giving AGNC a yield of 11.7%. A $3,150 investment in AGNC could purchase around 370 shares and generate $592 per year in dividend income.
4. PennantPark Floating Rate Capital (PFLT)
Current Yield: 10.4%
PennantPark Floating Rate Capital is a business development company that provides customized debt financing solutions to middle-market companies. The company primarily invests in floating rate senior secured loans of private middle-market companies. With floating rate loans, PFLT can grow its investment income as interest rates rise.
PFLT currently pays a monthly dividend of $0.095 per share, which equates to an annual dividend of $1.14 and a yield of 10.4%. Investing $3,000 in PFLT at current prices would acquire about 165 shares, generating around $189 per year in dividend payments.
5. FS KKR Capital Corp (FSK)
Current Yield: 11.1%
FSK is another business development company that invests primarily in private equity and debt investments. The company focuses on providing customized capital solutions to private middle market U.S. companies. It sponsors collateralized loan obligations (CLOs) and invests in senior secured loans, high-yield bonds, and equity tranches of the CLOs.
With strong growth prospects for private equity investments and rising interest rates boosting returns from debt financings, FSK is well-positioned going forward. The company pays an attractive quarterly dividend of $0.68 per share, giving it a yield of 11.1%. Investing $3,500 in FSK could acquire around 78 shares, generating $546 per year in dividends.
Summary
In summary, by investing $17,650 in total across these 5 ultra-high-yield financial stocks – $3,000 in NYMT, $3,000 in ARI, $3,150 in AGNC, $3,000 in PFLT, and $3,500 in FSK – you could generate approximately $2,000 per year in dividend income at current dividend payout rates.
Of course, dividends can fluctuate over time as financial conditions dictate, so the actual income stream may vary. However, this basket of 5 financial stocks provides an excellent starting point for constructing a high-yield income portfolio.
The companies operate in areas with strong tailwinds – real estate, mortgage lending, and private debt financing. And their high yields provide a substantial income cushion while you wait for dividend growth and capital appreciation over the long-term.
So if you’re looking to juice the income potential of your portfolio, give these 5 ultra-high-yield financial stocks some consideration. In today’s low interest rate world, dividends above 10% can go a long way toward reaching your income objectives.