Some things are hard to do. Climbing Mount Everest. Juggling four balls at a time. Learning a new language. Running a marathon.
Generating passive income might be on the list as well for some people. But it doesn't have to be. You can make $1,000 in annual income the easy way with these ultra-high-yield dividend stocks.
1. Ares Capital
Ares Capital (ARCC 0.73%) ranks as the largest publicly traded business development company (BDC) in the world. It provides alternative financing to middle-market companies across a wide range of industries.
As a regulated investment company, Ares Capital must distribute at least 90% of its taxable income to shareholders as dividends. Because the company is highly profitable, this translates to an especially attractive dividend yield of over 9.8%. An initial investment of around $10,200 would provide an annual dividend income of $1,000.
There shouldn't be any issues for Ares Capital to fund its juicy dividend. The company maintains a strong balance sheet. Its investment income and profits continue to grow. Ares Capital also has a solid track record with 56 consecutive quarters of paying steady or increasing dividends.
Investors could enjoy nice share appreciation as well. Ares Capital has generated market-beating total returns since its initial public offering in 2004. The demand for financing alternatives for the middle market also continues to increase.
2. Cohen & Steers Infrastructure Fund
I'm going to cheat just a bit with this pick. Cohen & Steers Infrastructure Fund (UTF -0.69%) is actually a closed-end fund (CEF) rather than a stock. However, the fund trades just as a stock does.
Cohen & Steers Infrastructure Fund definitely offers an ultra-high yield. Its distribution yield currently tops 8.1%. To make an annual income of $1,000, you'd need to invest a little under $12,300.
The CEF's portfolio includes common stocks, preferred stocks, bonds, and derivatives such as interest rate swaps. Its distributions are boosted by the use of leverage (borrowing).
Your total returns from the Cohen & Steers Infrastructure Fund could be less than the S&P 500 will deliver over the long term. But the fund's primary focus on securities issued by infrastructure companies should allow it to grow while paying a high level of income.
3. Energy Transfer LP
Energy Transfer LP (ET 0.12%) is a leader in the U.S. midstream energy industry. The company operates pipelines, terminals, storage facilities, processing and treatment facilities, and other assets focused on natural gas, natural gas liquids, crude oil, and refined products.
Its distribution yield stands at 9.5% right now. An initial investment of a little over $10,500 would provide an annual income of $1,000. Going forward, though, you'd probably need less money invested upfront since Energy Transfer expects to increase its distribution by 3% to 5% each year.
The limited partnership should be able to achieve its distribution growth goal. Energy Transfer reported distributable cash flow of more than $1.5 billion in the second quarter of 2023. Its excess cash flow after distributions totaled around $579 million.
I think that the demand for Energy Transfer's midstream assets will remain strong over the next decade and beyond. The company also has potential growth opportunities in transporting captured carbon.
