Key Points
AGNC Investment has paid its current dividend for 75 consecutive months.
Ares Capital has paid a stable or growing dividend for 17 straight years.
Even with a 2020 reset, Western Midstream has grown its distribution by roughly 400% since its formation in 2012.
The S&P 500 currently yields only about 1%, near its lowest level in more than 20 years. Many stocks offer even lower yields.
However, there are some big-time yields out there for those seeking a more lucrative income stream. Here are three ultra-high-yielding dividend stocks to buy this month, including one that yields over 13.5%.
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AGNC Investment
We'll start at the top with AGNC Investment (NASDAQ: AGNC), which currently yields more than 13.5%. The real estate investment trust (REIT) pays a monthly dividend, making it even more appealing to income-seeking investors.
The REIT exclusively invests in Agency MBS, pools of residential mortgages guaranteed against credit losses by government agencies such as Fannie Mae. Agency MBS are low-risk, fixed-income investments. AGNC Investment uses leverage to boost its returns, though that also increases its risk profile.
AGNC Investment has paid its current dividend for 75 straight months. Despite a challenging investment environment, it's in a strong position to continue paying its monster monthly dividend. It can currently generate mid-to-high double-digit leveraged returns on new MBS investments, which aligns well with its current dividend level.
Ares Capital
Ares Capital's (NASDAQ: ARCC) dividend yield is approaching 10%. The business development company (BDC) has paid a stable or growing dividend for 17 straight years.
The BDC is a leader in providing direct loans and other investments to private middle market companies ($500 million to $1 billion in revenue). While these higher-yielding loans have higher risk profiles, Ares has a terrific underwriting track record. Ares annualized net realized loss rate is less than 0% across more than $73 billion of realized investments. That's better than banks (-0.6%) and its BDC peers (-1.1%).
While Ares Capital's core earnings have dipped below its dividend during the first half of this year ($0.47 per share in the first and second quarters compared to its $0.48 per share quarterly dividend payment), its big-time payout isn't at risk. It also recorded a net realized gain of $0.14 per share so far this year. Additionally, it carried forward $1.38 per share of excess taxable income from last year for distribution in 2026. Add in its healthy portfolio and balance sheet, and it's in a solid position to maintain its streak of dividend stability and growth.
Western Midstream Partners
Western Midstream Partners (NYSE: WES) currently yields almost 8%. The master limited partnership (MLP), which sends a Schedule K-1 Federal tax form each year, has increased its distribution 193% since its reset in 2020 to strengthen its financial profile. Its distribution level is now well above its prior peak and has grown about 420% since its formation in 2012.
The MLP invests in energy midstream infrastructure, such as pipelines and processing plants, backed by long-term, fixed-rate contracts. That provides it with stable cash flow to fund its distribution and growth initiatives. Western Midstream expects to produce between $2.1 billion and $2.3 billion of distributable cash flow this year and $1.1 billion to $1.3 billion of free cash flow after funding capital projects, 75% of which will be on expansion-related initiatives such as its North Loving II plant and Pathfinder Pipeline.
Western Midstream also has the financial flexibility to make accretive acquisitions. It bought Brazos Delaware for $1.6 billion earlier this year. Its expansion investments should support 4% to 5% annual earnings growth over the long term. That should give the MLP the fuel to increase its distribution at a low- to mid-single-digit rate each year.
Monster income stocks
AGNC Investment, Ares Capital, and Western Midstream Partners stand out for their ultra-high-dividend yields. While they're riskier income investments, all three have a proven track record of paying a stable-to-growing dividend in recent years. With those trends likely to continue, they're ideal dividend stocks to buy this August for those seeking to seriously boost their passive income.
Matt DiLallo has positions in Ares Capital. The Motley Fool has positions in and recommends Ares Capital. The Motley Fool has a disclosure policy.