Want $1,000 in annual dividend income? Invest $10,000 in these ultra high-yield stocks

Do you want to make $1,000 in annual retirement income? I have good news. You can do it with a little under $10,000 spread across three dividend stocks.

Of course, there are no guarantees that these companies will never have to lower their payouts. So before anyone jumps in, let’s see if they have what it takes to sustain and grow their dividends over the long term.

Image source: Getty Images.

Two of these stocks currently offer double-digit percentage returns. If you split $9,907 among these three stocks at their current prices, you’d be entitled to dividend payments totaling just over $1,000 annually.

company (icon) Current price number of shares Annual payout per share upfront investment Annualized dividend payments
Annaly Capital Management (NYSE:NLY) $7.58 568 $0.88 $4,305 $500
AGNC Investment Corp (NASDAQ:AGNC) $14.42 208 $1.44 $2,999 $299
Partner for Enterprise Products (NYSE:EPD) $24.10 108 $1.86 $2,603 $201
To hum: $9,907 $1,000

Data Source: Yahoo Finance!

Annaly Capital Management

Perhaps the best-known ultra-high-yield stock that investors can count on to generate heaps of dividend income is Annaly Capital. This is a real estate investment trust (REIT) that does not buy real estate. Instead, Annaly Capital Management borrows at short-term lending rates to purchase mortgage-backed securities, which offer higher yields.

Managing a portfolio of low-interest short-term loans and mortgage-backed securities that pay much higher interest rates has been reliably profitable for Annaly. The company has paid over $1 billion in dividends every year since 2010.

Annaly’s shares are down around 13% over the past few months, and now the stock is offering investors a whopping 11.5% yield. The stock has been under pressure lately as investors have been concerned about rising interest rates. As long as interest rates are rising slowly enough for Annaly to adjust her portfolio of long-term assets accordingly, the company probably won’t need to cut its payout. The Federal Reserve has made it clear that it intends to raise interest rates slowly and without surprises.

Annaly shareholders also don’t need to worry too much about sharp economic downturns. Agency-backed securities on the company’s books account for 92% of total assets. If these borrowers default on their mortgages, the US government will effectively intervene to put Annaly back in good health. Not only is this added protection good for peace of mind – it keeps capital costs much lower than they otherwise would be.

AGNC Investment Corp.

AGNC Investment Corp. is another mortgage REIT that’s offering a juicy double-digit yield after its share price fell. AGNC Investment’s shares are down about 12% over the past month, and now the stock offers an enticing 10.1% yield. It’s also the only stock on this list that makes monthly dividend payments instead of quarterly.

AGNC Investment’s business model is generally the same as Annaly’s. The Company seeks to borrow at low short-term interest rates and use that capital to purchase longer-dated, higher-interest-rate mortgage-backed securities. AGNC Investment isn’t the biggest mortgage REIT out there, but it does buy a lot of mortgage-backed securities. The company ended 2021 with an investment portfolio valued at $82 billion.

Investors concerned about general economic disasters will be pleased to know that government-backed securities make up 95% of AGNC Investment’s total portfolio. That means if another pandemic forces many people to suddenly lose their jobs again, the company’s sales won’t fall.

As long as the Federal Reserve continues to slow monetary policy changes, AGNC Investment will have no trouble responding. The mortgage-backed securities in AGNC Investment’s portfolio were paying an average coupon of 2.84% at the end of 2021. The average interest rate for 30-year mortgages is currently 3.93% and rising.

Partner for Enterprise Products

If you’re hesitant about energy stocks because you remember the drilling and exploration company bankruptcies of early 2020, there’s one midstream provider worth checking out. With a dividend yield of 7.8%, Enterprise Products Partners stock offers the lowest expected yield for new shareholders. A history of steady payout increases spanning more than two decades suggests that shares in Enterprise can add more dividend income to your retirement account over time than the mortgage REITs on this list.

EPD dividend chart

EPD dividend data from YCharts.

If you own a vehicle, you know that gasoline prices can plummet quickly in response to a small increase in global supply or reduced demand. Both situations can decimate companies drilling for the stuff, but Enterprise gets paid to store and transport oil and gas through its pipeline network.

As the total volume of oil and gas that needs to be transported from point A to point B increases fairly steadily, Enterprise can get its customers to sign long-term price and volume commitments. The steady cash flows that these contracts provide allow the company to balance its dividend obligations with continued investment in new pipelines and assets.

Enterprise currently has approximately 50,000 miles of pipelines and enough storage capacity for 14 billion cubic feet of natural gas. With an increasing supply of infrastructure that the oil and gas industry relies on for its control, this company has one of the most reliable dividend programs you’ll find anywhere.

This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investment thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.

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