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Stock investing and farming are similar in some ways. Farmers plant seeds in the hope that they will grow and produce lots of fruit. Investors basically do the same thing.
However, buying stocks is much easier than farming, which requires a lot of labor. And the right stocks can regularly produce “fruit”, allowing you to relax and watch the flow of funds. What are good stocks to buy? Investing $10,000 in each of these five super-high dividend stocks could earn you nearly $4,000 a year in passive income.
1. Ares Capital
ares capital (NASDAQ:ARCC) is the largest publicly traded business development company (BDC). It primarily focuses on providing financing alternatives to the upper middle market. The BDC industry has grown significantly because many banks have avoided these opportunities.
As a BDC, Ares Capital must return at least 90% of its taxable income to shareholders in the form of dividends. With a current dividend yield of 9.5%, investing $10,000 in stocks would earn you $950 in passive income per year.
You should be able to expect this dividend income. Ares Capital continues to generate solid profits and has paid stable or increasing dividends every quarter for 14 consecutive years.
2. Energy transfer
energy transfer (New York Stock Exchange:ET) is a major midstream energy company that operates pipelines and storage facilities. The company has grown through organic growth and acquisitions, most recently completing the acquisition of Crestwood Equity Partners in November 2023.
The company’s dividend yield is 8.6%. If he invested $10,000 in Energy Transfer, at that level he could collect passive income of $860 in one year.
Income investors looking to buy and hold will likely prefer Energy Transfer. Limited partnerships (LPs) expect to increase their distributions by 3% to 5% annually over the long term.
3. Enterprise Product Partner
enterprise product partner (New York Stock Exchange: EPD) is also a leader in midstream energy and perfect for generating passive income. Like Energy Transfer, the company is organized as a limited liability partnership and operates pipelines, storage facilities, and other midstream assets.
Enterprise doesn’t give you as much distribution as Energy Transfer. However, the company’s yield of about 7.5% is not terrible. If you invest $10,000 in an LP, you can earn about $750 in passive income per year.
However, Enterprise Products Partners has a better sales track record than its midstream peers. The company has increased circulation for his 25th consecutive year, with a compound annual growth rate of nearly 7%.
4. Innovative industrial property
innovative industrial property (NYSE: IIPR) is the first and only real estate investment trust (REIT) to trade on the New York Stock Exchange focused on the legal cannabis market. The real estate capital provided by IIP is critical for U.S. cannabis operators, as federal regulations make it difficult to access traditional alternative financing options.
Similar to BDCs, REITs must return at least 90% of their income to shareholders in the form of dividends in order to be exempt from federal income taxes. If IIP’s dividend yield is 7.3%, his $10,000 investment in the stock will earn him $730 in passive income on an annual basis.
Despite some challenges in the U.S. cannabis industry, IIP has not been negligent in paying dividends. Over the past five years, the company has increased its dividend more than four times.
5.Verizon Communications
verizon communications (NYSE:VZ) Without a doubt, it is the most famous company on this list. The company has been a leader in the communications market for many years. Verizon provides wireless, Internet, television, and telephone services to customers around the world.
This stock has long been popular with income investors. Verizon’s dividend yield is over 6.6%, so it should still be. A $10,000 investment will generate over $660 in passive income per year.
I like Verizon’s 17-year history of consecutive dividend increases. We also like that the company’s free cash flow is increasing, which is a big plus for investors looking for reliable income.
When you add it all up
If you invest $10,000 in each of these five ultra-high dividend stocks, you should be able to earn just under $4,000 in passive income. It’s possible that one or more companies will reduce their dividends, but we think this scenario is unlikely.
An even more serious concern is that some of these stocks may underperform, potentially resulting in losses that more than offset the dividend income they generate. However, I think all five stocks have the potential to rise in value over the long term.
Should you invest $1,000 in Ares Capital right now?
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Keith Speights holds positions at Ares Capital, Enterprise Products Partners, and Innovative Industrial Properties. The Motley Fool has positions in and recommends innovative industrial real estate. The Motley Fool recommends Enterprise Products Partners and Verizon Communications. The Motley Fool has a disclosure policy.
Investing $10,000 in these five ultra-high dividend stocks could generate nearly $4,000 in passive income.
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