Dividend investing is not as exciting as high-risk tech or biotech plays. There, I said it. And I mean it.
However, "not as exciting" does not mean "not exciting at all." And it certainly doesn’t mean "not rewarding." Let me explain.
Numbers vary widely, but portfolios generating 10% to 20% returns annually can be considered successful—at least you beat the long-term S&P 500 returns. But what if you can replicate that rate of return with dividends and only dividends while simultaneously exposing yourself to capital appreciation?
In my content, I frequently talk about Dividend Kings and Aristocrats, but that doesn’t mean I don’t (or won't) venture out into the wider market to find high-yield companies. So today, I'll look at three high-yield dividend stocks and why you might consider them for a spot in your portfolio.
How I Screened For The Following Stocks
I generated the following list using Barchart’s Stock Screener. Here’s how I did it:
First, I went to the page itself and then used the following criteria to screen the entire stock market across major indices in the U.S.
- Current Analyst Rating: Set between 4.0 (high end of moderate buy) to 5 (strong buy). A stock’s dividend yields may be high because its trading price drops like flies. So, to avoid those, I filtered for companies with a big green thumbs up from Wall Street.
- Number of Analysts: Set to eight or more. Not to knock on companies with single firms covering it, but I like my data averages from multiple sources. That way, the average gives me a broad idea of how the market truly feels about the stock.
- Annual Dividend Yield (%): Set to 10% or more. As mentioned in the title, I looked for stocks with more than 10% yields in the last twelve months (TTM) and forward.
With these criteria, I got nine hits and arranged them from highest to lowest yields.
However, I did further digging because TTM and forward yields for most companies are inconsistent, as dividend payouts can be changed depending on the company’s performance.
To add a measure of reliability to the results, I checked their dividend histories and added another criterion, which is—
- Dividend Payment Histories: Consistent dividend payments for at least three years. This is not (yet) a filter available on the screener. I checked the stock’s dividend histories and confirmed if the high yields were recent one-offs or consistent. So, the top companies by yield should include dividend payouts from at least 2021, with four or more payments for quarterly schedules and 12 or more for monthly payouts.
As a result, SW stock didn't make the cut. And with that, I got my top three, starting with the highest-yielding on the list:
Trinity Capital (TRIN)
Trinity Capital is a business development company (BDC) that provides debt to growth-stage companies, including loans and equipment financings, primarily in technology and other high-growth industries. If you’re unfamiliar with BDCs, you can consider them like REITS, but they invest in other companies instead of real estate. As of Q1'24, Trinity Capital has over $1.6 billion in assets.
Trinity Capital's quarterly dividend payout is 51 cents, which works out to $2.04 annually or a 14.4% yield. This latest dividend distribution represents the 13th consecutive year of regular quarterly dividend increases. The company also has decent ratings from analysts: a 4.50 average or a strong buy based on eight analyst scores.
If everything goes accordingly, then investors of TRIN stock might find themselves holding a Dividend Aristocrat with over 10% yield in a little over a decade.
AGNC Investment Corporation (AGNC)
AGNC Investment Corp is a REIT that primarily invests in residential mortgage-backed securities (RMBS). The company leverages its capital to enhance returns and pays attractive dividends to shareholders.
How attractive, you ask? The company pays a monthly dividend of 12 cents, or $1.44 annually. That translates to a 13.9% yield based on current prices.
AGNC's performance is sensitive to interest rate changes, and as the chart shows, the past few days have been good for the stock price. Anticipated interest rate cuts and overall optimism primarily caused the uptick.
AGNC stock has a 4.0 rating based on 14 analysts, making it a moderate buy.
Saratoga Investment Corp (SAR)
Saratoga Investment Corp is another BDC that invests in debt and equity securities, focusing on senior and unitranche loans, mezzanine debt, and equity co-investments. The company primarily invests in middle-market businesses and has over $3.7 billion in investments across 35 companies.
SAR currently pays a $2.96 forward annual dividend based on the latest quarterly payment in May 2024. This represents an attractive 12.7% yield based on the stocks' last trading price. The company also has a 4.0 average rating from 8 analysts, making it a moderate buy.
Final Thoughts
Dividend investing doesn’t have to be unrewarding. You can find high-yield dividend stocks with consistent payouts - with the right tools. Of course, a little extra research wouldn’t hurt either to help ensure you get the right picks.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
