High-yield dividend stocks are particularly noteworthy in income investing. Seven stocks, all with yields over 7%, may spark rapid expansion in various industries.
The first one is a massive real estate company specializing in cannabis operators, and it has a portfolio that spans many states and more than a hundred locations. The second one then becomes a benchmark for asset management. It has a constant net income and has moved toward safe first-lien investments. The third is a major player in consumer staples. It invests in smoke-free goods to propel development in the oral tobacco market.
Meanwhile, the fourth has a consistent dividend policy and a diversified portfolio. Its portfolio consists of several businesses supported by strict risk management techniques. The fifth adopts a proactive portfolio management approach by concentrating on profitable multifamily buildings.
Finally, the sixth one takes a disciplined attitude toward risk and allocates its resources to assets with greater yields. The seventh one, last but not least, exhibits solid operational skills by using a successful equity investment strategy to produce considerable returns.
High-Yield Dividend Stocks: Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) holds 108 properties, totaling 8.9 million rentable square feet in 19 states (as of Q1 2024). The stock offers a forward dividend yield of 6.9%. No state holds for more than 15% of the yearly base rent. Similarly, only one tenant holds up to 17% of the portfolio. Moreover, the company’s portfolio comprises mission-critical, purpose-built real estate assets. They are suited to the requirements of cannabis entrepreneurs. The emphasis on premium homes facilitates a stable stream of long-term rental income.
Additionally, Innovative Industrial Properties has one of the least leveraged balance sheets in the REIT sector, with a debt-to-total gross assets ratio of 11%. As of the quarter’s conclusion, the business had more than $200 million in total available cash, giving it plenty of money to pay for commitments to strategic investments and development. Lastly, the company proactively focuses on portfolio optimization for higher returns, reflected in the smart disposal of the Los Angeles property, which was underutilized for cannabis activities.
Oaktree Specialty Lending (OCSL)
For Q2 2024, Oaktree Specialty Lending (NASDAQ:OCSL) delivered adjusted net investment income (NII) of 56 cents per share, unchanged from the previous quarter. The stock yields a forward dividend yield of nearly 11.4%. The stable growth of Oaktree Specialty Lending’s profitability is reflected in the stability of its adjusted net interest income. This is mostly derived from its floating-rate portfolio.
Moreover, between Sept. 30, 2022, and Q2 2024, first-lien investments rose from 71% to around 81%. At the same time, second-lien investments fell from 16% to 5% throughout that time. Thus, credit quality has improved due to the deliberate movement towards more secure investments. This is reflected in the preponderance of first-lien loans. Comparing Q2 to Q1, non-accrual investments dropped from 4.2% to 2.4% of the portfolio at fair value and from 5.9% to 4.3% at cost.
In short, the company’s sharp restructuring efforts and aggressive management of underperforming portfolio firms reflect the decline in non-accruals.
High-Yield Dividend Stocks: Altria (MO)
With a forward dividend yield of 8.7%, Altria (NYSE:MO) is making strategic investments in smoke-free products. These include NJOY and oral tobacco categories like On!. These investments demonstrate the company’s focus on harm reduction and diversification.
Altria’s portfolio expansion into alternative tobacco products positions it well to capitalize on shifting consumer preferences and regulatory developments. Particularly in light of the considerable rise the oral nicotine pouch industry is seeing. Further, with a year-over-year (YOY) growth of 13.8 share points, oral nicotine pouches now account for more than 40% of the oral tobacco market. Altria’s brand, Helix, reported a considerable 32% rise in shipment volume to over 33 million cans during the first quarter.
These growth rates highlight Altria’s smokeless product portfolio’s robust development potential, especially in the oral tobacco market. Oral nicotine pouches have grown significantly YOY, and Helix’s shipping volume has grown impressively. Overall, these trends indicate customer interest and acceptance, setting Altria up for future development and income creation in this market.
Ares Capital (ARCC)
Ares Capital (NASDAQ:ARCC) has a consistent dividend policy. This is in the lead with a forward dividend yield of 9.8%. In line with Q1 2024, Ares Capital announced a dividend of 48 cents per share for Q2 2024. A $635 million taxable income overflow is estimated for 2023. This is more than double the usual quarterly dividend, giving dividend stability.
Further, in Q1 2024, Ares Capital committed about $3.6 billion in new investments; the portfolio increased by 9% annually to $23.1 billion at fair value. Due to the company’s broad market coverage across various industries and company sizes, diverse investment options are made possible, supporting portfolio durability and growth.
Moreover, by reducing possible credit risks and maintaining asset value, Ares Capital maintains strong downside protection. Its portfolio has a weighted average loan-to-value of 43%. To mitigate concentration risk, the portfolio is well-diversified among 510 distinct firms, and no investment represents more than 2% of the portfolio at fair value.
High-Yield Dividend Stocks: Ready Capital (RC)
Ready Capital (NYSE:RC) offers a 14% future dividend yield. It is actively selling certain non-performing loans in its portfolio. In the designated quarter, the company transferred $655 million in loans held for sale and a $146 million valuation allowance against those loans. This method demonstrates a proactive approach to risk management and capital allocation optimization.
Additionally, Ready Capital endeavors to improve overall portfolio performance by selling underperforming assets and reallocating funds into investments that provide market returns and cash flows. Further, 78% of its portfolio, comprised of multifamily and mixed-use buildings, reflects a strategic concentration on these assets. Even though the multifamily industry faces immediate difficulties, like rising interest rates and slower rent growth in some areas, Ready Capital is still positive about these assets’ long-term prospects.
Finally, Ready Capital’s portfolio comprises only 4.4% office loans, indicating a low level of exposure to the office sector. The company has implemented a repositioning plan in response to the current stress against the office sector issues.
Great Elm Capital (GECC)
With a forward yield of 13.5%, Great Elm Capital (NASDAQ:GECC) invested over $64 million at yields of roughly 13% on new assets in Q1 2024. Since first-lien investments hold the bulk of the capital allocated, this solidifies the portfolio’s overall credit quality.
Moreover, Great Elm Capital established a joint venture to engage in CLO (collateralized loan obligation) firms and associated warehousing facilities. The structure of these assets may generate large dividends. This may start in H2 2024 and continue through 2025 and beyond.
Additionally, compared to a prior note offering in August 2023, the 8.5% notes successfully issued in April had a spread-to-treasury improvement of more than 0.50%. To sum up, strong profitability, new equity capital, and an upgrade to BBB flat from BBB minus by Egan-Jones in August 2023 were the reasons for the improvement in financing rates.
Stellus Capital (SCM)
Stellus Capital (NYSE:SCM) offers a dividend yield (forward) of 11.2%. The company uses a successful equity investing strategy to provide realized returns that balance out possible losses. Stellus Capital Investment realized one sharp investment in the second quarter. It has estimated aggregate proceeds of about $5.3 million and realized profits of $3.8 million. In the first quarter, there were no realizations. Based on history, the stock portfolio’s eventual realization may be greater than double its cost basis. This shows that the equity investing approach helps increase total returns.
Further, Stellus Capital’s first-quarter financial results show good financial success and operational efficiency. The interest income from portfolio assets accounted for the majority of the $26.0 million in investment income. Lastly, net investment income climbed to $10.2 million, or 42 cents per common share, despite higher gross OpEx, demonstrating sharp cost control and revenue growth.
As of this writing, Yiannis Zourmpanos held long positions in IIPR and OCSL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
