Want $10,000 in Annual Dividend Income? Invest $94,000 in These 5 High-Yield Stocks.
Different methods can achieve the same goal. For example, you could put nearly $183,300 into U.S. 1-Year Treasuries to make $10,000 in a year. But there are other alternatives.
It's even possible to make 10,000 in annual dividend income with well under $100,000 upfront. How? Consider investing $94,000 in these five high-yield stocks.
1. Medical Properties Trust
Medical Properties Trust (MPW 1.09%) (MPT) is a real estate investment trust (REIT) that leases properties to hospital operators. Its dividend yield currently tops 12.7%. Buying $20,000 (one-fifth of the original $100,000 investment) of MPT shares would generate over $2,500 in dividend income over the course of a year.
The company does face the challenges of higher interest rates and some tenants with financial troubles. However, MPT's models project that it should be able to cover its dividend throughout the next decade even if interest rates increase.
2. Pioneer Natural Resources
Pioneer Natural Resources' (PXD 1.68%) dividend yield of over 11.4% ranks as the highest in the S&P 500. Investing $20,000 in the oil and gas stock would generate nearly $2,300 in annual dividend income.
Part of Pioneer's dividend is tied to free cash flow, which could fluctuate with oil prices. I suspect, though, that oil prices will hold up relatively well with recent production cuts announced by Saudi Arabia and Russia.
3. Ares Capital
Ares Capital (ARCC 0.58%) reigns as the largest publicly traded business development company (BDC). It provides financing primarily to middle-market businesses. With Ares Capital's dividend yield above 10.1% right now, a $20,000 investment would enable you to rake in more than $2,000 in annual income.
The company's dividend appears to be on solid footing. Ares Capital has had over 13 years of stable or increasing dividends. The banking crisis that began earlier this year could also help the BDC as middle-market companies seek alternative financing.
4. Energy Transfer LP
Energy Transfer LP (ET -0.39%) is one of the leaders in the U.S. midstream energy market. Its dividend currently yields nearly 9.7%. Buying $20,000 of Energy Transfer stock would generate more than $1,900 in dividend income over the next 12 months.
The company's assets include 14,300 miles of pipelines that transport crude oil, 5,650 miles of pipelines that transport natural gas liquids, and 53,500 miles of midstream gathering pipelines. The good news for income investors is that Energy Transfer's distributions shouldn't be impacted by any volatility in oil and gas prices.
5. Devon Energy
The energy sector has yet another member of our list in Devon Energy (DVN 2.73%). This independent oil and gas producer pays a dividend yield of nearly 9.5%. A $20,000 investment in Devon would provide close to $1,900 in annual income. That brings the total income from these five stocks to well over $10,000.
Like Pioneer Natural Resources, Devon has a dividend program that consists of a fixed component and a variable component linked to free cash flow. Its dividend could change with oil price swings. However, as alluded to earlier, I don't look for oil prices to drop by much if at all.
Caveat emptor
These five high-yield stocks should easily generate annual dividend income of $10,000 or more. There's even some wiggle room in the event that Pioneer and/or Devon trim their dividends a little.
My view is that Medical Properties Trust, Pioneer Natural Resources, Ares Capital, Energy Transfer, and Devon Energy should have pretty good prospects if the U.S. economy doesn't enter into a recession. But there's no guarantee that will be the case.
The old Latin phrase "caveat emptor" (buyer beware) is always true when investing in stocks. It's possible that any of these stocks could experience declines that more than offset any dividend income produced.
Source: The Motley Fool
