5 ultra-high dividend stocks that will make you rich

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Mmaking money on the stock market is easy … if you have dividend stocks.

According to a report released by JP Morgan Asset Management in 2013, publicly traded companies that initiated and increased their payments between 1972 and 2012 an average annual return of 9.5%. As for their non-dividend-paying peers, average annual earnings have been paltry 1.6% over the same 40-year period. Because dividend-paying stocks are almost always profitable and proven, they are logical candidates for enriching investors.

Ideally, income seekers want the highest possible return with the least amount of risk. However, the data shows that once yields cross around 4%, return and risk are closely correlated. That is, very high-yielding companies tend to be more of a problem than they are worth. Since return is simply a function of payout versus share price, a failing or struggling operating model can trap income seekers with a high dividend yield.

But there is good news. The following five ultra-high dividend stocks – which I arbitrarily define as a 7% + yield – have the potential to make their shareholders rich.

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Annaly Capital Management: 10.3% return

Arguably one of the safest ways to build long-term wealth is to buy and own the leading name among mortgage real estate investment trusts (REITs), Annaly Capital management (NYSE: NLY). Annaly has paid over $ 20 billion in dividends since its inception over two decades ago, and it’s average return of around 10% over the past 20 years.

Simply put, Annaly seeks to borrow money at low short-term borrowing rates and uses that capital to buy assets (mortgage-backed securities) with a higher long-term return. The difference between this higher long-term yield and this lower short-term borrowing rate is known as the net interest margin. The larger this margin, the more Annaly has the potential to make a profit. Historically, mortgage REITs have seen their net interest margins widen significantly in the early years of an economic recovery as the yield curve steepens. It means that we are just in the right place where mortgage REITs outperform.

The other key selling point for Annaly is that she loaded her portfolio with agency securities ($ 92.6 billion out of $ 100.4 billion in total assets). It’s a way of saying that a large majority of its assets are backed by the federal government in the event of default. This additional protection is what allows Annaly to use leverage wisely to her advantage in order to increase her profitability.

A person using a walkie-talkie while standing beside a pipeline.

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Enterprise Product Partners: 7.4% return

Put bluntly, the idea of ​​buying into an oil and gas stock following the bombing of the industry during the pandemic is enough to shake some long-term investors. But ultra-high dividend midsize company Enterprise Product Partners (NYSE: EPD) was virtually immune to the pandemic – as evidenced by its payout coverage ratio not falling below 1.6 – and is riding a 22-year streak of increasing its base annual payment.

The biggest advantage of Enterprise Products Partners for investors is its place within the energy complex. Intermediate companies that provide the capacity to transport and store oil, natural gas, and natural gas liquids generally provide predictable cash flow regardless of economic performance. Relying on transparent fee-based contracts allows Enterprise to undertake projects without inadvertently hurting its cash flow or profitability. The company currently has more than 50,000 miles of pipelines in the United States, as well as 14 billion cubic feet of natural gas storage capacity.

The other factor fueling healthy distributions for enterprise product partners is its willingness to spend on capital expenditures and acquisitions. While we are likely to see energy companies gradually transition to greener solutions over time, fossil fuels will remain a key source of energy production for decades to come.

A woman uses the speakerphone function on her smartphone.

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Mobile telesystems: 11.1% efficiency

The highlight of this list, in terms of performance, is the Russian telecommunications giant Mobile telesystems (NYSE: MBT). Keep in mind that MTS, as the company is known, varies its dividend based on its operating performance. Nonetheless, it regularly offers a payment north of 7% per annum.

The bread and butter of Mobile TeleSystems will continue to be its wireless operations. Even though Russia is a heavily saturated wireless market, infrastructure upgrades will be key to driving organic growth. The introduction of 5G download speeds in major Russian cities, along with the ongoing rollout of 4G in Russian suburbs, is expected to create a sustainable technology upgrade cycle that will lead to increased consumption of data – and data. are where wireless service providers make their juiciest margins.

Beyond the simple predictability of cash flow associated with its wireless operations, MTS also a number of new and rapidly growing verticals, including MTS Bank, pay TV, and cloud services, to name a few. In the past year alone, the number of active pay-TV users increased 54% to 7.1 million, and the number of over-the-top customers nearly tripled to 2.9 million. At the same time, cloud services revenue increased 28% compared to the previous year quarter. While these segments don’t contribute much to revenue currently, they are likely to play an important role in the company’s long-term growth prospects.

Stacks of ascending rooms placed in front of a two-story dwelling house.

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AGNC Investment Corp. : yield of 8.8%

Did I mention that the mortgage REIT industry has hit its stride? In addition to putting your money at the service of industry leader Annaly, her true sidekick, AGNC Investment Corp. (NASDAQ: AGNC), has a very good chance of outperforming and enriching its shareholders. Since its IPO about 13 years ago, AGNC’s return has hardly dropped below 8%.

Like Annaly, AGNC has aligned its portfolio with take advantage of agency mortgage-backed securities. Excluding unannounced securities, the company held $ 62.1 billion in agency-backed residential mortgage-backed (RMBS) securities in the first quarter. This compares to less than $ 500 million in non-branch RMBS and $ 1.1 billion in credit risk transfer securities. Without getting too technical, only around 3% of total assets are in potentially risky long-term assets, which has led to a steady stream of dividend income for shareholders.

And there is a bonus awaiting AGNC investors. While the other companies on this list pay their dividends quarterly or twice a year, AGNC distributes its dividend of $ 0.12 on a monthly basis. If the U.S. economy continues to gain momentum and the yield curve steepens, that payment and the company’s book value have room to rise.

A small pyramid of tobacco cigarettes resting on a thin bed of cured tobacco.

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Altria Group: yield 7.3%

Last but not least, remember to put the name of the brand tobacco stock Altria Group (NYSE: MO) to work in your portfolio. Since 1972, the appreciation in Altria’s share price plus the dividend has returned more than 2,600,000% to its shareholders, according to data from YCharts.

Focusing on the US market, the bulk of Altria’s revenue comes from the sale of premium brand Marlboro cigarettes. Although the volume of cigarette shipments has declined fairly steadily over the years, with the negative health effects of smoking causing some users to quit, the addictive nature of nicotine has also allowed Altria to increase the price. of its high-end products. These price increases generally offset the decline in cigarette shipments.

Altria is also focused on life beyond tobacco cigarettes. It offers a range of smokeless tobacco products in select cities and has a 45% stake in Canadian marijuana inventory. Cronos Group. If the United States ever legalized cannabis at the federal level, Altria would almost certainly become a favorite in the United States to develop a leading cannabis vape product with Cronos.

Even if this is not the growth stock it once was, Altria’s strong dose of share buybacks and its exceptional pricing power make it a dividend-paying stock with all the potential to enrich its shareholders. .

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Sean williams has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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