While interest rates have risen over the past year, many quality ultra-high-yield names have traded higher, so yields have fallen below 7%. We screened our 24\/7 Wall St. ultra-high-yield dividend stock database for quality stocks with long-term track records that Boomers and retirees with a higher risk tolerance can load into tax-sheltered accounts, with dividends pouring in while potentially generating solid total return. Four companies hit our screens that we have followed for years, and all make sense now for growth and income investors looking for an edge in a frothy, overbought stock market.<\/p>\n
Why Do We Cover Ultra-High-Yield Dividend Stocks?<\/p>\n
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ShutterstockProfessional \/ Shutterstock.com<\/p>\n
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While these stocks aren\u2019t for everyone, investors building 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 generate substantial passive income.<\/p>\n
Ares Capital<\/p>\n
Ares Capital (NASDAQ: ARCC<\/a> | ARCC Price Prediction<\/a>) specializes in providing financing solutions for the middle market, and with seven analysts rating it a Buy and a 9.76% dividend yield, it\u2019s a solid idea now. This high-yielding business development company (BDC) specializes in acquisitions, recapitalizations, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions for middle-market companies. It is widely considered one of the highest-quality BDCs due to its massive scale and defensive track record through multiple economic cycles. The company has a long history of regular payouts and supplemental distributions since its 2004 market entry.<\/p>\n It also makes growth capital and general refinancing. It prefers to invest in companies in basic and growth manufacturing, business services, consumer products, healthcare products and services, and information technology.<\/p>\n The fund will also consider investments in industries such as:<\/p>\n Restaurants It focuses on investments in the Northeast, Mid-Atlantic, Southeast, and Southwest regions from its New York office; the Midwest region from its Chicago office; and the Western region from its Los Angeles office.<\/p>\n The fund typically invests between $20 million and $200 million, with a maximum of $400 million, in companies with annual EBITDA between $10 million and $250 million. It makes debt investments between $10 million and $100 million.<\/p>\n The fund invests through:<\/p>\n Revolvers The fund also selectively considers third-party-led senior and subordinated debt financings and opportunistically acquires stressed and discounted debt positions.<\/p>\n Ares Capital prefers to act as an agent and lead transactions in which it invests. The fund also seeks board representation in its portfolio companies.<\/p>\n MPLX<\/p>\n MPLX (NYSE: MPLX<\/a>) is a diversified, large-cap master limited partnership formed by Marathon Petroleum. This company is a top holding in the Alerian MLP Energy exchange-traded fund and pays a healthy 7.15% dividend. The company primarily transports crude oil and refined products, with terminals in the U.S. Midwest and Gulf Coast regions, and gathers and processes natural gas in the Northeast, following its 2015 acquisition of MarkWest Energy. MPLX owns pipeline and logistics infrastructure primarily backed by long-term, fee-based contracts with its parent company, Marathon Petroleum. Management is targeting a 12.5% distribution growth rate and maintains a highly comfortable 1.3x distribution coverage ratio.<\/p>\n The company\u2019s assets include:<\/p>\n Network of crude oil and refined product pipelines MPLX also owns crude oil and natural gas gathering systems, as well as pipelines, natural gas, and NGL processing and fractionation facilities in key U.S. supply basins.<\/p>\n Starwood Property Trust<\/p>\n This off-the-radar global real estate giant boasts a 12.30% dividend yield and is led by real estate legend Barry Sternlicht. Starwood Property Trust (NYSE: STWD<\/a>) operates as a real estate investment trust (REIT) in the United States, Europe, and Australia. It is the largest commercial mortgage REIT in the U.S. and has not lowered its dividend since its inception in 2009. It has navigated the current high-interest-rate real estate environment by shifting heavily into infrastructure lending and triple-net lease properties.<\/p>\n The company operates through four segments. The Commercial and Residential Lending segment:<\/p>\n Originates, acquires, finances, and manages commercial first mortgages The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments.\u00a0The Property segment primarily develops and manages equity interests in stabilized commercial real estate properties, including multifamily and net-leased commercial properties, held for investment purposes.<\/p>\n The Investing and Servicing segment:<\/p>\n Manages and works out problem assets Universal<\/p>\n This somewhat off-the-radar company is another of the world\u2019s leading tobacco merchants, operating as a global tobacco leaf supplier rather than a cigarette manufacturer. Universal (NYSE: UVV<\/a>) has reported strong demand, has been in business for almost 150 years, and pays a 7.36% dividend. Universal processes and supplies leaf tobacco and plant-based ingredients worldwide. It operates as a global leaf tobacco supplier, using a remarkably stable, slow-moving industry model to fund payouts. The company also has Dividend King status, with 50+ consecutive years of annual dividend increases.<\/p>\n The company operates through two segments:<\/p>\n Tobacco Operations It procures, finances, processes, packs, stores, and ships leaf tobacco for sale to manufacturers of consumer tobacco products.\u00a0The company:<\/p>\n Contracts, purchases, processes, and sells flue-cured, burley, and oriental tobaccos that are primarily used in the manufacture of cigarettes Universal also provides value-added services, including:<\/p>\n Blending, chemical, and physical tobacco testing \u00a0<\/p>\n
\nRetail
\nOil and gas
\nTechnology<\/p>\n
\nFirst-lien loans
\nWarrants
\nUnitranche structures
\nSecond-lien loans
\nMezzanine debt
\nPrivate high yield
\nJunior Capital
\nSubordinated debt
\nNon-control preferred and common equity<\/p>\n
\nInland marine business
\nLight-product terminals
\nStorage caverns
\nRefinery tanks
\nDocks
\nLoading racks and associated piping
\nCrude and light-product marine terminals<\/p>\n
\nNon-agency residential mortgages
\nSubordinated mortgages
\nMezzanine loans
\nPreferred Equity
\nCommercial mortgage-backed securities (CMBS)
\nResidential mortgage-backed securities<\/p>\n
\nAcquires and contains unrated, investment-grade, and non-investment-grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions
\nOriginates conduit loans to sell these loans into securitization transactions and acquire commercial real estate assets, including properties from CMBS trusts<\/p>\n
\nIngredients Operations<\/p>\n
\nDark air-cured tobaccos are used to manufacture naturally wrapped cigars, cigarillos, and smokeless and pipe tobacco products<\/p>\n
\nService cutting for various manufacturers
\nManufacturing reconstituted leaf tobacco
\nJust-in-time inventory management services
\nElectronic nicotine delivery systems
\nCustomer smoke testing services<\/p>\n