Dividend stocks are a great place to put your money right now, especially if you’re looking for a high-yield investment. Companies that pay dividends on a regular basis are typically profitable on an ongoing basis and have weathered economic downturns before. Furthermore, over the long term, income equities outperform non-dividend-paying equities by a wide margin.
There is a slew of extremely safe high-yielding dividend stocks (an arbitrary phrase I am using to describe income stocks that have yields of at least 7%) that can assist in padding investors’ pockets during this period of tremendous uncertainty. Two of the world’s most secure high yield dividend equities follow.
AGNC Investment Corp.: 12.6% yield
Mortgage real estate investment trust (REIT) AGNC Investment Corp. (AGNC 3.53%) is the first extremely secure passive-income powerhouse that investors may safely add to their portfolios. In 12 of the past 13 years, AGNC has provided a double-digit yield.
Although the goods AGNC acquires might be somewhat complex, its operational structure is simple. This is a firm that aims toward borrowing money at the lowest short-term rate feasible and uses this cash to obtain higher-yielding long-term assets, like mortgage-backed securities (MBS). AGNC’s mission is to increase its net interest margin, which is the average normal yield of its owned assets take away the company’s average borrowing rate.
The appeal of the mortgage REIT sector from an investing standpoint is that it seldom throws you a curveball. You can generally tell if AGNC and its peers are facing an advantageous or unfavorable scenario based on the interest rate yield curve and Federal Reserve monetary policy.
Another thing to consider about AGNC is that $66.9 billion of its $68.6 billion assets are agency securities. In the event of a default, an “agency” security is backed by the federal government. This additional protection allows AGNC to leverage its profit potential through leverage.
PennantPark Floating Rate Capital: 9.51% yield
Business development firm (BDC) PennantPark Floating Rate Capital (PFLT 0.83%) is a second exceptionally secure high yield dividend stock that can be purchased right now if you’re searching for something that’s relatively off the radar of most income investors. For more than seven years, PennantPark has paid a $0.095 monthly dividend and offered a 9.5 percent yield.
As a BDC, PennantPark focuses on middle-market firms’ first-lien secured debt. This means that when a firm files for bankruptcy, the first in line to be paid out is its debt, which is known as first-lien secured debt.
To summarize, a “middle-market company” is one that has a market value of less than $2 billion and is publicly listed. Because small-cap firms might not have had the time to establish their reputations, they may be unable to obtain credit. As of March 31, 2022, this has allowed PennantPark to achieve an average yield of 7.5% on its debt investments.
However, what truly makes PennantPark Floating Rate Capital so appealing is the mix of its debt investments. As of March 31, 100% of its $1.03 billion debt portfolio was composed of variable-rate securities. With the federal government having no choice but to quickly raise interest rates in order to combat historically high inflation, PennantPark’s debt investment portfolio has turned into a literal gold mine. Every rate hike improves PennantPark’s secured loans, making them more valuable to the firms income stream.
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