The amount of income you make from investments is primarily the result of two factors. First, it depends on how much money you invest up front. The old adage that "it takes money to make money" is still true. Second, your income will vary based on the yields that your investments generate.
For example, if you have $30,000 to invest, putting it all in the S&P 500 will only make you around $735. Deploying that amount into 12-month U.S. Treasury bonds would earn you a little over $1,330. But if you want to make over $3,300 in income this year, you might want to consider investing $30,000 in these three ultra-high-yield dividend stocks.
1. Ares Capital
Ares Capital (ARCC 1.66%) ranks as the largest publicly traded business development company (BDC). The company focuses on providing financing to middle-market businesses. Ares Capital's portfolio currently includes 466 companies.
Like all BDCs registered as regulated investment companies, Ares Capital returns at least 90% of its taxable income to shareholders to avoid paying federal taxes. The company hasn't reduced its dividend payout in over 13 years. Ares Capital's current dividend yield stands at 11.1%.An investment of $10,000 in the stock (one-third of the initial $30,000) would generate roughly $1,110 in income this year.
Don't let Ares Capital's year-to-date decline scare you off. The BDC stock's total return has since it went public in 2004. It has also handily beaten the major index over the last five years.
One key to Ares Capital's success is its risk management. The company maintains a highly diversified portfolio. Its largest exposure to a single business makes up only 2% of its total investments. Ares Capital also focuses on lending to companies in less cyclical industries.
2. Enterprise Products Partners
You could add $783 in annual income by investing another $10,000 inEnterprise Products Partners (EPD 0.45%). This midstream energy company currently offers a distribution yield of 7.83%.
It's not out of the question that you could make even more income. Enterprise has increased its distribution for 24 consecutive years. Although the company raised its distribution in January 2023, it has been known to occasionally give unit holders multiple increases within the same year.
Enterprise Products Partners has been able to be so consistent in passing along distributions to investors because of its business model. The company operates over 50,000 miles of pipelines plus several other midstream assets. Its cash flow doesn't fluctuate based on oil and gas prices.
Even with the high priority for many countries to reduce carbon emissions produced by fossil fuels, Enterprise should be able to count on growth for years to come. The company is also jumping on an opportunity to profit from this trend by partnering with Occidental Petroleum to capture and transport carbon dioxide in Texas.
3. Medical Properties Trust
So far, we've seen how you can make a little over $1,890 in income. How can you get the total to over $3,300? Invest the final $10,000 inMedical Properties Trust (MPW -0.42%). This real estate investment trust (REIT) has a dividend yield north of 14.2% right now and could generate an additional $1,420 in income.
Some might wonder how sustainable Medical Properties Trust's dividend is, though. One of the company's top tenants, Prospect, is behind on its rent payments this year. However, the healthcare REIT's worst-case scenario in its 2023 guidance, which assumes no rent collection from Prospect, should still be enough to fund the dividend at current levels.
Others might worry about Medical Properties Trust's stock performance wiping out any income you might receive. However, there are some reasons for optimism that the beaten-down stock could rebound. The REIT's hospital operator tenants are generally on firmer financial ground now that they've received reimbursem*nt increases.
Also, Prospect is also looking to sell some assets that should help it repay money due to its creditors. Medical Properties Trust expects that it will recover most, if not all, of the money owed within the next 12 to 18 months.
Caveat emptor
Note that the Latin phrase "caveat emptor" (buyer beware) applies to these three ultra-high-yield stocks. Any or all of them could experience significant declines that cause you to lose money despite the juicy dividends.
Keith Speights has positions in Enterprise Products Partners and Medical Properties Trust. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
