3 Ultra-High-Yield Dividend Stocks That Are Simply Too Cheap to Ignore

Pay less, receive more. That sounds like a great proposition, doesn't it? Such opportunities don't come around as often as we'd like.

However, I think some stocks currently offer the chance to pay less and receive more thanks to their attractive valuations and juicy dividends. Here are three ultra-high-yield dividend stocks that are simply too cheap to ignore.

1. Ares Capital

Ares Capital (ARCC 0.73%) is the largest publicly traded business development company (BDC) based on market cap. It provides financing to middle-market businesses with a focus on the upper tier of the market.

The company's dividend yield is nearly 9.5%. This sky-high yield is largely due to BDCs being required to return at least 90% of their income to shareholders in the form of dividends to be exempt from paying federal taxes.

Ares Capital's shares trade at only 8.8 times forward earnings. Its price-to-book ratio is a low 1.07. These metrics would make any stock's valuation look attractive.

But Ares Capital isn't cheap because it's performing poorly. The company's business is booming with core earnings per share jumping 18% year over year in the third quarter of 2023. It has also delivered total returns that topped the S&P 500 by more than 85% since its initial public offering in 2004. Ares Capital's total return has also beaten the S&P 500 in the last three-year and five-year periods as well.

2. Pfizer

Pfizer (PFE 0.55%) ranks as one of the largest drugmakers in the world. The company has been in business since 1849. It currently markets eight products with annual sales of $1 billion or more.

Big pharma stocks have long been favorites for income investors because of their strong dividends. Pfizer is no exception. That's especially the case now with its dividend yield at nearly 6%.

Pfizer's forward earnings multiple is 12.5, well below the healthcare sector average of nearly 18.4. This low valuation is the result of declining sales for the company's COVID-19 products and the upcoming loss of exclusivity for several top-selling drugs.

However, Pfizer's long-term prospects look good. The drugmaker expects to add roughly $20 billion in annual revenue by 2030 from new product launches and new indications for existing products. Business development deals could generate another $25 billion in additional annual revenue.

3. Verizon Communications

You're probably familiar with Verizon Communications (VZ 1.17%) even if you're not one of the company's customers. Verizon provides wireless services in the U.S. and other countries. It's one of the largest telecommunications companies in the world.

Verizon's dividend yield of over 6.8% should catch investors' attention. In addition to this ultra-high yield, the company has also increased its dividend for 17 consecutive years. That's the longest streak of dividend hikes in the U.S. telecommunications industry.

What about valuation? Verizon looks pretty good on that front, too. Its shares currently trade at close to 8.4 times expected earnings. By comparison, the average forward earnings multiple of S&P 500 stocks in the communications services sector is 17.3.

To be sure, Verizon faces some challenges. The wireless market is highly competitive. However, the company appears to be headed in the right direction. Verizon reported a significant improvement in free cash flow in the third quarter of 2023. Its streaming bundle with Netflix and Max should also attract more subscribers.