I have a confession to make. I'm much more interested in dividend stocks than I've ever been before. Part of it is that I'm inching closer to retirement. While I don't rely on income from dividend stocks yet, it's appealing to me to have money returned to me regularly to reinvest.
Dividend yield isn't my only consideration in selecting dividend stocks, but it's certainly a key consideration. I've found quite a few top-tier stocks with exceptionally high dividend yields, at least 4 times greater than the yield offered by the S&P 500. Many of them don't require a large upfront investment. Here are my favorite ultra-high-yield dividend stocks to buy with $100 right now.
1. Ares Capital
Ares Capital (ARCC +1.65%) is the largest publicly traded business development company (BDC). It's managed by a subsidiary of Ares Management Corporation, a leading global alternative investment manager. Ares Capital provides direct loans to and invests in private middle-market companies in the U.S.
NASDAQ: ARCC
Key Data Points
This stock is cheap in two ways. First, its share price of under $22 is easily affordable. Second, Ares Capital's forward price-to-earnings ratio is only 10.7.
While I like Ares Capital's valuation, I like its dividend even more. As a BDC, the company must return at least 90% of its income to shareholders as dividends. Ares Capital generates plenty of income to return, as evidenced by its lofty forward dividend yield of 8.95%. The company has paid stable to growing dividends for 63 consecutive quarters and counting.
The total addressable market for Ares Capital is estimated to be around $5.4 trillion. The BDC market continues to expand as middle-market companies turn to direct lending. As one of the largest and most respected players in the industry, Ares Capital is well positioned to benefit from this market growth.
2. Enbridge
When I first heard of Enbridge (ENB +0.19%) years ago, the company primarily focused on midstream energy operations. It's still a top player in the midstream energy industry, with 18,085 miles of crude pipeline and 18,952 miles of natural gas pipeline. However, Enbridge is also now the largest natural gas utility in North America and a significant producer of renewable power.
NYSE: ENB
Key Data Points
I think this diversification makes Enbridge even more attractive. Its business is resilient throughout all economic and commodity cycles. Less than 1% of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) is linked to commodity prices. And roughly 80% of Enbridge's EBITDA is protected from inflation.
Enbridge has increased its dividend for an impressive 30 consecutive years. That streak seems highly likely to continue, considering the company's distributable cash-flow payout ratio is between 60% and 70%. This energy leader is no slouch with the amount of its dividend, either, with a forward dividend yield of 6.07%.
You can scoop up one share of Enbridge for less than $45. That investment will buy you partial ownership in a relatively low-risk company that should provide reliable income plus respectable long-term growth prospects thanks to the increasing demand for natural gas.
Image source: Getty Images.
3. Enterprise Products Partners
Another of my favorite ultra-high-yield dividend stocks is also a midstream energy leader. Enterprise Products Partners (EPD 1.77%) operates more than 50,000 miles of pipeline and owns assets that include natural gas processing trains and liquids storage facilities.
Like Enbridge, Enterprise Products Partners is highly resilient. Around 90% of its long-term contracts are protected from inflation. The master limited partnership (MLP) has consistently generated strong distributable cash flow per unit during good times and bad times, the latter including the financial crisis of 2007 through 2009, the oil price collapse of 2015 through 2017, and the COVID-19 pandemic.
Enterprise Products Partners has increased its distribution for 26 consecutive years. Its forward distribution yield is a juicy 6.93%. The MLP has also rewarded unitholders with unit buybacks.
One unit of Enterprise Products Partners will cost you around $31. If you also bought a share each of Ares Capital and Enbridge, you'd still have a few dollars remaining from an initial $100. I don't think you'll find three better ultra-high-yield dividend stocks for this low price.
