It has been a challenging year for everyday and professional investors alike. Since the year began, both broad-based S&P 500 and technology dependent Nasdaq Composite Bears have fallen into market territory. To add to these challenges, the US economy has contracted in back-to-back quarters and many industry-leading companies have downgraded their growth outlook, at least in the near term.
But there is a silver lining to this upheaval. No matter how volatile equities may appear in the short term, every single crash, correction and bear market (except the current bear market) throughout history has been wiped out by a bull market rally. In other words, the big drop is a red carpet opportunity for patient investors to bounce back.
Arguably the best deals can be found in dividend stocks right now. Companies that regularly pay dividends on a recurring basis are almost always profitable and have been time-tested — that is, they have demonstrated their ability to navigate economic contractions and recessions.
What’s more, income stocks have an extensive history of running circles around their non-paying peers. A JPMorgan Asset Management report released in 2013 found that companies initiating and increasing their payouts over a 40-year stretch (1972–2012) delivered an average 9.5% annualized return. For the non-paying stocks, they managed to achieve just 1.6% annualized returns over the same time frame.
But not all dividend stocks are created equally. Some have the potential to provide secure, inflation-reducing income on a monthly basis. The following are three ultra-high-yield dividend stock averages… average… a 9.73% annual yield and paying out to its shareholders every month. If you want to collect $300 in monthly income, all you need to do is invest $37,000, split evenly between these three supercharged monthly payers.
AGNC Investments Corp.: 11.27% Yield
Monster is the first ultra-high-yield dividend stock mortgage real estate investment trust (REIT) to make monthly payments. AGNC Investment Corp. (AGNC -1.34%,, AGNC’s return of around 11.3% is actually the highest on this list, and the company has averaged double-digit yields in 12 of the past 13 years.
Even though the products purchased by REITs can be somewhat complex, the operating model for this industry is very easy to understand. Mortgage REITs like AGNCs seek to borrow money at the lowest short-term rate and acquire high-yield long-term assets. These long-term assets are mortgage-backed securities (MBS), which is how the industry got its name. The larger the difference between the average yield received from the properties owned (known as the “net interest margin”) minus the average lending rate, often the more profitable the mortgage REIT.
As I mentioned earlier, what makes AGNC such a favorite among income seekers is the predictability of the mortgage REIT industry. Keeping a close eye on the Federal Reserve’s monetary policy and interest rate yield curve gives investors everything investors need to know how well or poorly the industry is performing.
To be completely blunt, AGNC has faced adversity since the beginning of the year. Parts of the yield curve have reversed and the Fed is aggressively raising interest rates to combat historically high inflation. Both factors weigh on the AGNC’s book value (mortgage REITs often trade close to their book value) and net interest margin.
But there’s good news: Mortgage REITs are among the stock market’s top bad news buy candidates. For example, while higher interest rates are raising short-term borrowing costs for AGNCs, they are also going to lift the returns generated from the MBS purchased over time. To add to this point, the US economy spends far more time than it contracts favoring the yield curve that slopes and to the right more often than not. In short, the numbers game shows that patient investors will prevail.
As a final point, AGNC Investments almost exclusively buys agency securities. An “agency” asset is one that is protected by the federal government in the event of default. This additional protection gives AGNCs the ability to deploy leverage to increase their profits.
Pennantpark Floating Rate Capital: 9.25% Yield
Another ultra-high-yield dividend stock that can help you generate $300 in monthly income is the little-known Business Development Company (BDC). Pennantpark Floating Rate Capital (PFLT -1.47%,, PennantPark’s monthly payout over seven years is pegged at $0.095, with the company currently holding close to 9.3%.
PennantPark’s $1.23 billion investment portfolio includes a variety of investments. About 13% of its capital is tied up in preferred stock and common stock equities. The remaining 87% consists almost entirely of first-lien secured loans from mid-market companies, with a fractional percentage tied up in second-lien secured loans.
A “mid-market company” is typically a publicly traded business with a market cap of less than $2 billion. Since most small-cap companies are not profitable and/or time-tested, their access to credit facilities/loans may be limited. PennantPark is more than happy to provide first-lien secured loans to investigated companies because it knows it can generate a juicy yield on that loan. As of the end of June, the company’s $1.06 billion debt investment portfolio was generating a yield of 8.5%.
There’s something else to note, PennantPark’s picks for dealing only with first-lien secured loans. In the event of default, first-lien secured borrowers are first in line for payment. Mind you, I’m not saying a payment default for PennantPark is a good thing. Instead, I’m making the case that its loan portfolio is judiciously free of risk.
Another feather in PennantPark Floating Rate Capital’s cap is the investment quality of the company’s portfolio. At the end of June, of the 123 companies that PennantPark invested in, only two were on non-accrual (ie, delinquent). This represents a micro.9% and 0.1% of the company’s portfolio on a cost and value basis, respectively.
But the most exciting aspect of this under-the-radar BDC may be that 100% of its investment loans are of the variable-rate type. With the country’s central bank raising interest rates by 225 basis points so far in 2022, and nowhere close to being eliminated, Pennantpark is in a position to collect additional interest income without lifting a finger. This shows that its monthly payments are on solid footing.
Horizon Technology Finance Corp.: Yield 8.67%
The third and final ultra-high-yield dividend stock with the potential to help you generate $300 in monthly income is Horizon Technology Finance Corp. (HRZN -1.55%,, Horizon has given an average yield of 10% or more for most of the following decade.
What makes Horizon a bit different as both a BDC and an ultra-high-yield company is its focus on high-growth, development-stage companies. As the name of the company clearly suggests, it is a BDC focused on buying loans for venture capital backed companies in the technology sector. However, it also owes debt to companies engaged in life sciences, health information and renewable energy.
You’re probably thinking that investing in growth-stage companies would carry a significantly higher risk of default. However, a quick look at the company’s most recent operating results shows otherwise. Of its debt investment portfolio of more than $550 million, only 4.3% of outstanding debt has the company’s credit rating of 1 or 2 on a scale of 1 to 4. Horizon notes that a 2-rated loan offers the potential for a future loss of principal. , while a credit rating of 1 means “risk of deteriorating credit quality and a high degree of principal loss.” Even with interest rates rising sharply, approximately 96% of a company’s portfolio is exhibiting high credit quality or a standard level of risk.
Similar to PennantPark, Horizon’s focus on small businesses works to its advantage in the produce department. Because it has been lending to growth-stage companies, and many early-stage companies have reduced access to credit markets, Horizon has been able to net the inflation-crushing yield on the debt it holds. As of the end of June, Horizon’s yield on its debt investment portfolio, which totals 50 investments, was a hearty 14.2%.
Something else interesting about Horizon Technology Finance that you’re not likely to find with other ultra-high-yield monthly payers is an existing share repurchase program. Since instituting this buyback program, it has bought back $1.9 million worth of its common stock, and has the authorization to repurchase up to $5 million. Reducing a company’s outstanding share count has the potential to boost earnings per share and make the company more fundamentally attractive to investors.