Investing in ultra-high-yield dividend stocks can be one of the most powerful tools to generate consistent passive income over time. These investments have the potential to provide cash flow that not only keeps up with inflation but can also significantly outperform more traditional fixed-income options like bonds. However, picking the right high-yield stocks requires a balance between high returns and sustainability, especially since not all ultra-high-yield stocks are created equal. In this article, we delve into three such stocks that stand out for their resilience, potential growth, and extraordinary dividend yields: W. P. Carey Inc. (NYSE: WPC), EPR Properties (NYSE: EPR), and ARMOUR Residential REIT (NYSE: ARR). Each stock presents a unique opportunity for investors looking to bolster their income portfolios with a strong yield.
1. W. P. Carey Inc. (NYSE: WPC)
W. P. Carey Inc., established in 1973, is one of the largest and most diversified net-lease REITs in the world. It specializes in owning high-quality commercial real estate, including industrial, warehouse, office, and retail properties. WPC’s strength lies in its diversification across property types, with a strong emphasis on long-term leases to creditworthy tenants, which provides stable and predictable income.
In 2024, WPC offers an impressive dividend yield of approximately 7.5%, and it has a long history of increasing its dividends for over two decades. Even during challenging periods, such as the COVID-19 pandemic, WPC was able to maintain its dividend, thanks to its inflation-linked leases and a portfolio that includes recession-resistant tenants such as logistics companies and essential retailers. This kind of resilience makes it a favorite among dividend investors. Furthermore, WPC’s unique blend of both domestic and international properties mitigates some of the risks associated with region-specific downturns
Recently, W. P. Carey has faced pressure from rising interest rates, which has led to a slight dip in its stock price. However, this presents a potential buying opportunity for long-term investors. The company’s cash flow remains robust, and its prudent capital allocation strategy ensures that its dividend is sustainable for years to come. Analysts forecast that WPC will continue to outperform many of its peers due to its diversified asset base and inflation-protected lease structures
2. EPR Properties (NYSE: EPR)
EPR Properties is a specialized REIT that primarily focuses on experiential real estate, including movie theaters, water parks, ski resorts, and other entertainment and educational facilities. What makes EPR so attractive is its focus on niche markets that cater to a consumer demand for experiences over goods. This shift towards experiential consumption has been a significant tailwind for the company, even as traditional retail has struggled.
In 2024, EPR boasts a dividend yield of around 8.5%, making it one of the highest in the sector. EPR was hit hard during the pandemic, especially as its tenants—movie theaters and amusement parks—temporarily shuttered operations. However, with the resumption of normal activities, EPR’s properties have bounced back, and its tenants have shown resilience. The company has a well-diversified portfolio of over 200 tenants, reducing its reliance on any single source of income. Additionally, the entertainment sector is seeing a strong resurgence as consumers prioritize experiences
Another positive factor is EPR’s long-term leases, many of which include percentage rent clauses, meaning the company earns a portion of its tenants’ revenue. This setup allows EPR to benefit from its tenants’ growth, particularly in a rebounding post-pandemic economy. Though there are still risks associated with consumer spending trends and potential recessions, EPR’s emphasis on the entertainment and recreation sectors positions it to benefit from pent-up demand
3. ARMOUR Residential REIT (NYSE: ARR)
For those looking for a pure-play on high yields, ARMOUR Residential REIT (NYSE: ARR) stands out with its extraordinary dividend yield of over 14%. ARR is a mortgage REIT that invests in residential mortgage-backed securities (MBS). Essentially, ARMOUR borrows at low short-term rates and invests in higher-yielding long-term MBS, pocketing the difference between these rates. While the company’s payout ratio is higher than ideal, ARMOUR’s monthly dividend payouts provide consistent cash flow for investors
ARR’s dividend yield is among the highest in the REIT sector, but this comes with increased volatility. Mortgage REITs like ARR are highly sensitive to changes in interest rates, and the company’s income depends heavily on the spread between short-term borrowing costs and long-term mortgage rates. The Federal Reserve’s interest rate policy plays a critical role in ARMOUR’s profitability. With rising rates in 2024, ARMOUR has faced pressure, but its experienced management team has shown the ability to navigate such environments. Its strategy of leveraging hedges to manage interest rate risk has helped maintain a substantial dividend, even during periods of market volatility
Investors should note that while ARR’s dividend yield is highly attractive, the stock is inherently more volatile than traditional equity REITs. However, for those willing to stomach short-term price fluctuations, ARR can provide a robust income stream with its monthly dividends and high payout.
In the world of dividend investing, it’s crucial to strike a balance between high yields and the sustainability of those payouts. W. P. Carey, EPR Properties, and ARMOUR Residential REIT offer compelling opportunities for income-focused investors, with yields ranging from 7.5% to over 14%. These companies have demonstrated resilience in different economic environments and sectors, providing investors with the potential for both income and growth.
As a firm believer in the power of dividend investing, I see these ultra-high-yield stocks as valuable components of a long-term, income-generating portfolio. Dividend investing is not just about earning income today—it’s about securing a future where compounding returns can significantly accelerate wealth accumulation. Reinvesting dividends and holding for the long haul can lead to exponential growth in a portfolio’s value, making it one of the most effective strategies for achieving financial independence.
