While there is not a shortage of techniques that are effective at making money on Wall Street, buying dividend producing stocks has been a very smart method to create wealth.
The biggest problem that income investors have is wanting the top yield possible with the minimum amount of risk. Unfortunately, once you get into the high-yield space (4% and over), yield and risk usually are connected.
But that does not mean all high-yield dividends are bad news. If you want to sit back and get $1,500 in quarterly income, you might do so by putting up an investment of $63,000 and splitting it among these two stocks, which both have great yields.
Enterprise Products Partners: 8.36% yield
If there is a premier ultra-high-yield dividend stock inside the energy sector, its Enterprise Products Partners. Its almost 8.4% yield is amazing but even more so is the fact that the firm has increased its yearly payout for 22 years in row, making it among the safest ultra-high-yield stocks out there.
For most income investors, the ideas about “safe” and an “oil stock” probably do not belong in the same category. Last year’s historic drawdown for oil turned the upstream companies upside down. But Enterprise Products Partners was protected from this thanks to it being a midstream company.
If you need more evidence that Enterprise Products Partners is a solid company, take a look at its coverage ratio. During the worst of the covid pandemic, it did not go under 1.6 (any figure under 1 would mean an unsustainable dividend). Slow but steady growth makes this company one of the best income stocks to buy.
AGNC Investment: 8.99% yield
For people who simply want dividend income ASAP, let me tell you about AGNC Investment. AGNC is a mortgage REIT (real estate investment trust) that gives its dividend every month: $0.12 each month, equating to a $1.44 base yearly payout. It currently gives yields around 9%, but has normally had an average double-digit yield in 11 of the previous 12 years.
What makes AGNC so special is that we have entered the sweet spot where mortgage REITs are doing very well. Looking back at the multiple economic recoveries from the recession, it is normal for the yield curve to turn steep. This describes the situation where long-term bond yields go up while short-term bond yields go down or flatten. A yield curve that is steepening coupled with monetary policy from the Fed is usually a good recipe for net interest margin expansion for mortgage REITs.
Author: Steven Sinclaire
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