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Dividend stocks are great to own when market uncertainty is high, like it has been with a pandemic raging across the globe. But finding reliable dividend paying stocks has been no easy feat right now.
But you don't have to go it alone in your quest for income investments. We've done the research to uncover the companies with the best dividend yields, and most importantly, the balance sheet strong enough to keep paying them.
And high-yield dividend stocks are your best bet for adding income too. You won't find any yield worth trifling with in any of the usual places.
The Fed has told us that rates will not be increased until at least 2023, and unless we see some economic and/or medical miracle soon, any rate increase is likely to be minimal. If we do not get a vaccine sometime this year or next, the economic damage of continued coronavirus spread could push that back even further.
The Great Yield Hunt has been going on since the end of the Great Credit Crisis. The days of retiring and putting all your money in 6% treasuries of 7% FDIC-insured bank CDs have been over for close to two decades. Getting the type of income you need for your dream retirement from your investments requires thinking outside the box.
That's why we've found the best dividends stocks, all with yields over 10%. These aren't offering double-digit yields because their share prices have been hurt, either. These are companies with business models that are throwing off high cash flows.
Here's how to get your slice…
This Tech Dividend Stock Has Growth Potential
Newtek Business Services Corp. (NASDAQ: NEWT) is structured as a business development company (BDC), but it is unlike any other BDC you will see on the market. Newtek owns several businesses that it has controlled for many years. These businesses include payment processing firms, SBA lenders, a technology solutions company that offers Internet hosting and e-commerce, managed IT services, secure private cloud hosting, web design and application development, information technology security solutions, and a company that offers credit and debit card processing services.
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Newtek uses these portfolio companies to offer loans and services like payroll, technology solutions, insurance coverages, and employee benefits to small and mid-size businesses. The revenue generated by the portfolio companies is paid out to the BDC, who then passes most of the cash along to us as dividends.
Newtek also uses a shareholder-friendly business model. This BDC is internally managed, so there are no management fees paid to outside asset managers that reduce cash flows to shareholders. Being shareholder-friendly makes sense since insiders own more than 6.6% of the almost $370 million company.
The current dividend yield is over 12% right now, making Newtek a good fit for a diversified portfolio of higher-yielding investments.
The Income Stock That Lends Money to Facebook
Hercules Capital Inc. (NYSE: HTGC) is also a business development company, but its business model looks nothing like Newtek's. Hercules Capital is the largest business development company focused on venture lending, and it's the lender of choice for innovative entrepreneurs and venture capital partners.
Hercules lends to traditional venture industries like technology, life sciences, renewable energy, and software as a service (SaaS) companies. The BDC also has a portfolio of Special Situation companies that have used Hercules' senior secured loans to grow and develop their business during times of change or during inflection points that are considered too risky for banks and other lenders.
When you look through Hercules' portfolio of companies, you realize it is not throwing money at fly-by-nights. Both 23 and Me and Ancestry.Com have done business with Hercules. So has Facebook Inc. (NASDAQ: FB) and DocuSign Inc. (NASDAQ: DOCU). The client list is a who's who of technology, life sciences, and energy companies.
Right now, Hercules has a portfolio worth $2.47 billion, with a yield of 13.6%. Much of that yield is passed on to us as shareholders of the BDC. The current yield or shares of Hercules Capital is 11.96%.
Our Best High-Yield Dividend Stock Today
Ares Capital Corp. (NASDAQ: ARCC) is yet another business development company. It specializes in financing the acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle-market companies. Ares prefers to invest in companies engaged in manufacturing, business services, consumer products, healthcare products and services, and information technology service sectors. The fund will also consider investments in restaurants, retail, oil and gas, and technology sectors.
Ares is affiliated with private equity and alternative credit leader Ares Management Corp. (NYSE: ARES) and draws heavily on the parent companies' relationships and expertise to get a deal done.
Ares Capital has a yield right now of 11.4%.
All three of these are business development companies, but they serve different segments of the economy. They offer various services and operate in different markets.
All three yield over 10% and would be excellent additions to a diversified alternative income portfolio.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.