Dividend stocks with sky-high yields (greater than 10%) are normally trouble. An elevated yield more often than not indicates a company with deteriorating fundamentals and/or a less-than-optimal outlook. 

There are some exceptions to this rule of thumb, however. The Brazilian iron ore specialist Vale (VALE -2.60%) and the Israeli international shipping company Zim Integrated Shipping Services (ZIM 1.65%) are two beaten-down income stocks that sport ginormous dividend yields and compelling long-term valuations. Here's why smart investors may want to bottom fish on these two ultra-high-yield dividend stocks right now.

Rolled up U.S. currency next to a notepad that has the word dividends written on it.

Image source: Getty Images.

Vale: A heavily discounted mining stock

Brazilian mining company Vale has been locked in a downward trend for the past year. Specifically, the company's shares have dipped by an unsightly 34% over the prior 12 months. Investors have been hitting the exits on this top mining stock as a result of a major slump in Vale's core iron ore business.

The iron ore industry as a whole has been struggling lately due to a suite of headwinds, including lower demand from key customers like China, falling unit prices, increased competition, and higher costs stemming from rising freight rates and unfavorable foreign exchange rates between suppliers and consumers.

Vale's stock has been hit particularly hard hit because investors are growing increasingly concerned that the company's forward-looking 11.5% annualized dividend yield may not be safe. To Vale's credit, management has repeatedly said that the company remains committed to paying a top-flight dividend -- despite these headwinds in the iron ore space. 

What's more, a recent investor presentation by the company highlighted its growing opportunity as a key player in the fast-growing nickel space. Demand for nickel is forecast to steadily rise for the remainder of the decade due to its use in the production of electric vehicles and renewable energy sources. Vale's Brazilian, Canadian, and Indonesian-based nickel operations could thus be a major source for future growth.  

All told, the market has arguably grown far too pessimistic about this ultra-high-yield dividend stock. Passive income seekers and bargain hunters alike may therefore want to take a closer look at this top mining stock. 

Zim: Negative growth has been priced in

Zim Integrated Shipping Services is an Israeli cargo shipping company that has been in business since 1945. Despite its longevity, the company didn't really begin to take flight from a revenue generation standpoint until the start of the COVID-19 pandemic. Specifically, Zim's top line has shot up by a whopping 314% since January 2020, thanks to surging demand for shipping services and a spike in global freight rates.

While investors initially piled into this international shipping stock in response to these dual tailwinds, Zim's share price has cratered in 2022. Growing concerns about a possible global recession have knocked Zim's stock down by a staggering 46.5% this year. As a result, its shares are now trading at a meager 0.44 times 2023 projected revenue.

Passive income seekers may want to take advantage of this sharp pullback. After boosting its dividend payout to 30% of net income in the most recent quarter, Zim's effective annualized yield for 2023 (when accounting for the 25% withholding tax for Israel-based companies) presently stands at approximately 19.6%. And this yield may even be markedly higher if the company follows through on plans to raise its payout to 50% of annual net income.     

So, while Zim's top line is expected to drop by a hefty 32% next year, that negative growth is arguably priced in at this point. The company's rock-bottom valuation and sky-high yield are thus two solid reasons to consider buying this beaten-down stock right now.