I went to a Prince concert years ago. He opened with one of his hit songs from the '80s -- Let's Go Crazy. I still remember him uttering the first lines of that song, "Dearly beloved, we are gathered here today to get through this thing called life. Electric word, life. It means forever -- and that's a mighty long time."
Prince was right: Forever is a mighty long time. Of course, when investors use the word "forever" they might really mean a long time that's easier to envision, perhaps 20 years.
With this view of "forever" in mind, I've been considering which stocks that pay exceptionally juicy dividends are worthy of owning for a mighty long time. Here are three ultra-high-yield dividend stocks you can buy and hold "forever."
1. Ares Capital
Ares Capital (ARCC 0.68%) is the largest publicly traded business development company (BDC). As a BDC, Ares provides financing primarily to middle-market businesses with annual revenue between $10 million and $1 billion.
NASDAQ: ARCC
Key Data Points
If you're looking for an ultra-high dividend yield, Ares Capital won't disappoint. Its forward dividend yield currently tops 8%. The company has also delivered the highest base dividend per share growth over the last 10 years of any BDC with a market cap of at least $700 million.
Demand for the direct lending Ares Capital provides continues to grow. Middle-market businesses are turning to BDCs like Ares for good reasons. The financing they offer can be closed quickly without some of the hassles involved with borrowing from a bank.
The direct lending market is huge. Ares Capital estimates its total addressable market is around $3 trillion if limited only to traditional middle-market businesses and roughly $5.4 trillion if some companies with annual revenue above $1 billion are included.
Ares Capital is well-positioned to capitalize (no pun intended) on this opportunity. It has ample liquidity to finance new deals, a good reputation in the industry, and strong relationships with its customers. Unsurprisingly, Ares Capital has delivered 70% higher total returns than the S&P 500 since its IPO in 2004.
2. Enterprise Products Partners
Enterprise Products Partners (EPD +0.32%) is a limited partnership (LP) that operates over 50,000 miles of pipeline in the U.S. that transport crude oil, natural gas, natural gas liquids (NGLs), and other petrochemicals. The company also owns midstream assets including liquids storage facilities and natural gas processing trains.
NYSE: EPD
Key Data Points
Midstream energy companies are known for their attractive distributions. Enterprise Products Partners offers one of the best distributions around with a forward yield of 6.4%. Even better, the company has increased its distribution for an impressive 26 consecutive years.
But is Enterprise Products Partners really a stock you can buy and hold forever? I think so. The demand for energy infrastructure isn't going away. Enterprise is investing heavily in growth opportunities with $7.6 billion of major capital projects in various phases of construction.
What I like most about this stock (other than its juicy distribution) is its resiliency. Enterprise Products Partners has delivered double-digit percentage returns on invested capital and strong cash flow during both good and bad times.
3. Pfizer
You might not have heard of Ares Capital or Enterprise Products Partners before, but most Americans are pretty familiar with Pfizer (PFE +0.04%). The big pharmaceutical company markets blockbuster drugs including Eliquis and Ibrance and vaccines such as Abrysvo and Comirnaty.
NYSE: PFE
Key Data Points
Pfizer stock looks especially attractive to income investors right now. Its forward dividend yield is 6.6%. CFO David Denton again expressed the company's commitment to maintain and grow its dividend in Pfizer's fourth-quarter earnings call earlier this month.
Some investors could be worried about the potential impact of a looming patent cliff. Several of Pfizer's top-selling products lose U.S. patent exclusivity over the next few years. However, those patent expirations didn't take the company by surprise. Pfizer has used the hefty cash stockpile built from sales of its COVID-19 products during the worst of the pandemic to fund multiple acquisitions. These deals have added several drugs that should help drive growth in the second half of the decade.
Importantly, Pfizer has successfully navigated patent cliffs in the past. The company has been in business since 1849 and its stock has traded publicly since 1942. As Prince might say were he still alive, that's a mighty long time.
