This has been a one-of-a-kind year for Wall Street and everyday investors. At no point throughout history has the Federal Reserve entered an aggressive rate-hiking cycle with the stock market in a full-fledged correction or bear market. But with the U.S. inflation rate hitting a four-decade high of 9.1% in June 2022, the nation's central bank has had little choice but to tackle its biggest prevailing problem.

This has left investors to make a tough choice: Put their money to work in the stock market with the near-term outlook for the U.S. economy weakening, or sit on cash and have inflation slowly eat away at what they've set aside. Even with the inflation rate set to fall in 2023, it'll still likely to be well above its historic average through much of the year.

A person holding a fanned assortment of folded cash bills by their fingertips.

Image source: Getty Images.

Thankfully, investors do have options to combat historically high inflation. One of the smartest moves to make is to buy high-yielding dividend stocks. Companies that pay a dividend are usually profitable, time-tested, and have transparent long-term growth outlooks.

But there's a catch. Because yield is a function of payout relative to share price, extra vetting needs to be done by investors to ensure that a high-yield company's business model isn't broken. If it is, a plunging share price might lead you into a yield trap.

The good news is that there are high-quality ultra-high-yield dividend stocks -- those with yields above 7% -- that can help you crush inflation in 2023. Here are three of them.

AGNC Investment: 14.39% yield

First up is mortgage real estate investment trust (REIT) AGNC Investment (AGNC 0.68%), which at 14.4% offers the highest yield on this list. Although most double-digit yields aren't sustainable, 2022 will mark the 13th year out of the past 14 when the company has maintained a yield north of 10%.

Mortgage REITs like AGNC have a straightforward operating model: They aim to borrow at the lowest short-term rate possible and use this capital to buy higher-yielding long-term assets. These "assets" are usually mortgage-backed securities (MBS), which is how the industry got its name ("mortgage REIT"). The difference between the average yield they're generating on the assets they own minus their average borrowing rate is known as net-interest margin. The wider the net-interest margin, the better things are going for mortgage REITs.

This year has been a bit of a nightmare scenario for the industry. Short-term borrowing rates have soared due to the Fed's hawkish monetary policy, and the interest rate yield curve has flattened or inverted. This is bad news for net-interest margin and AGNC's book value. But this also isn't the company's first rodeo through a downturn.

The great thing about mortgage REITs is they benefit from patience. For instance, the interest rate yield curve spends a considerable amount of time sloped up and to the right during long periods of economic expansion. In other words, longer-dated bonds have higher yields than shorter-dated bonds. When this happens, AGNC can expect its net-interest margin to expand.

To add to the above, while higher interest rates have increased short-term borrowing costs, they're also lifting the yields on the MBSs AGNC has been buying. Over time, this, too, will provide a boost to net-interest margin.

But the true selling point for income investors on AGNC is its general avoidance of non-agency securities. "Agency" assets are backed by the federal government in the event of default, whereas non-agency assets aren't. Just $1.7 billion of the company's $61.5 billion investment portfolio was comprised of credit-risk transfer and non-agency securities. Holding so much in agency assets allows AGNC's investment team to prudently use leverage to increase its income potential.

Altria Group: 7.89% yield

A second ultra-high-yield dividend stock that can help you put inflation in its place in 2023 is tobacco stock Altria Group (MO -0.57%). Altria's board targets a distribution in the neighborhood of 80% of its adjusted earnings per share. That currently works out to a yield of nearly 8%.

Pardon the apropos pun, but Altria has been smoked by the broad-market indexes over the past five years. As the public has become more aware of the dangers of using tobacco products, adult cigarette smoking rates have declined. Between the mid-1960s and 2020, adult cigarette smoking rates have fallen from above 40% to just 12.5%, according to the Centers for Disease Control and Prevention. While this might sound awful for Altria's operating model, it's a company that still has plenty of catalysts in its corner.

Despite a declining percentage of smokers in the U.S., one thing Altria hasn't relinquished over the past five-plus decades is its pricing power. Because tobacco products contain nicotine, an addictive chemical, Altria is well aware that it can increase prices to more than offset volume-based declines. It's especially easy for Altria to outpace inflation and volume headwinds due to the fact that it sells the No. 1 premium cigarette brand in the U.S.: Marlboro.

Beyond just leaning on its pricing power, Altria Group is looking to the future with a number of alternative revenue channels. Back in 2019, the company made a $1.8 billion equity investment into Canadian licensed cannabis producer Cronos Group. Though Washington, D.C., has failed at its cannabis reform efforts, thus far, Altria stands ready to help Cronos with derivative product development, marketing, and distribution if and when the U.S. gives cannabis the green light.

Altria also expects to become a sizable player in the burgeoning vape market. With the company's investment in Juul not panning out, it's free to develop its own vape products or may once again look to make an acquisition. 

Although its best growth days are in the rearview mirror, Altria's shareholder-first focus continues to make it a relatively safe stock to own in any environment.

Multiple energy pipelines leading to large storage tanks.

Image source: Getty Images.

Enterprise Products Partners: 7.65% yield

The third ultra-high-yield dividend stock that can help you crush inflation in 2023 is oil and gas company Enterprise Products Partners (EPD 0.03%). Enterprise Products Partners is currently riding a 24-year streak of increasing its base annual distribution.

Given the historic demand-drawdown in oil and natural gas associated with the initial stages of the COVID-19 pandemic, some investors might not be thrilled about the prospect of putting their money to work in energy stocks. But rest assured, the issues that plagued most oil and gas companies in 2020 had virtually no tangible impact on Enterprise Products Partners' operations.

The reason Enterprise has been able to shake off oil and natural gas spot-price volatility is because it's a midstream operator. It's effectively an energy middleman that relies on long-term contracts to transmit, store, and process oil, natural gas, natural gas liquids, and refined product. The company's reliance on fixed-fee contracts insulates it from the effects of inflation, as well as produces highly predictable operating cash flow.

Cash-flow transparency is critical to midstream operators since they constantly need to reinvest in new and existing infrastructure. The company notes that it has approximately $5.5 billion invested in more than a dozen projects, with a heavy lean toward natural gas liquids processing and export. These projects help move the profit needle higher but also ensure that Enterprise Products Partners can continue to increase its annual distribution.

As I pointed out earlier this week, Enterprise Products Partners should also be a beneficiary of global energy supply chain issues. Russia's invasion of Ukraine has created serious supply question marks throughout Europe. Meanwhile, underinvestment by major energy companies during the pandemic is likely to provide a floor beneath the price of oil and natural gas. In other words, it's an open invitation for domestic drillers to eventually boost production, which would increase the demand for energy infrastructure.

Enterprise Products Partners is about as rock-solid as they come among ultra-high-yield companies and is the perfect investment to put inflation in its place next year.