3 Top Dividend Stocks Paying Up to 26%
November 23, 2020
These Top Dividend Stocks Deliver Solid Yields
Planning for retirement used to be quite simple. Not anymore.
Back in the old days, all you needed was a decent-sized nest egg. If you invested your savings in some safe bonds or CDs, you could generate more than enough interest income to fund a comfortable retirement.
But retirees face a tough challenge nowadays. Thanks to rock-bottom yields, even a six-figure portfolio won’t throw off enough interest to pay the bills. Therefore, retirees have to look elsewhere to generate enough retirement income.
One solution: top dividend stocks.
Even with bond yields plunging, top dividend stocks sport respectable payouts. And because corporate profits (and by extension their distributions) tend to grow over time, these income streams come with built-in inflation protection.
Of course, higher payouts come with higher risk. But for savers who do their homework, top dividend stocks can present a suitable substitute to traditional fixed-income securities like corporate bonds and Treasury notes.
So to help get you started, I’ve highlighted a few of my favorites below.
To be clear, these names don’t represent “buy” recommendations, but they do serve as a great starting point for further research.
MV Oil Trust
MV Oil Trust (NYSE:MVO) owns a collection of oil wells across Texas and the southern U.S. But rather than plowing the company’s profits into drilling new sites, executives are content to milk existing operations. This explains how the trust can fund such a high dividend yield: 26% at the time of this writing.
Mind you, big payouts come with big risks. MV Oil Trust’s quarterly distributions fluctuate with every shift in the energy market. Management even cut the second-quarter dividend completely after COVID-19 hammered the energy market. And this income stream will eventually end as the partnership’s oil wells run dry.
But for investors who understand the risks up front, stocks like MV Oil Trust can be lucrative investments.
Shell Midstream Partners LP
In the energy business, Shell Midstream Partners LP (NYSE:SHLX) sits in the space between the exciting drilling companies of the oil patch and the stodgy refineries near customers. The partnership owns thousands of miles of pipelines, which transport commodities like oil and natural gas from producers to end-users. That’s why industry analysts call this section of the sector the “midstream.”
But it’s a lucrative place to be. While pipelines cost billions of dollars to construct, ongoing costs come in at just a fraction of sales. And because pipeline owners like Shell often have monopolies over the markets they serve, they have no problem raising their prices year after year.
This explains how Shell Midstream Partners has managed to pass on such large, consistent distributions to its unitholders. Even during the recent downturn in the oil patch, this partnership has boosted its payout. And right now, SHLX units come with an upfront yield of 18.6%.
Main Street Capital Corporation
Main Street Capital Corporation (NYSE:MAIN) is a pretty straightforward business to wrap your head around. The company borrows money from deposits at a low interest rate. Management then lends out that money to businesses in the form of high-yield loans. Main Street’s profit, called the spread, comes from the difference between the interest it pays to lenders and the interest it receives from borrowers.
It’s a lucrative business. Main Street Capital’s executives have carved out a profitable niche: lending to small and midsized businesses that have limited access to capital. Because these companies have few alternatives, Main Street has the freedom to charge above-average interest rates.
All of which is great news for shareholders. Right now, MAIN units come with an upfront yield of almost eight percent. And analysts project that this payout will grow as the partnership expands its asset base.
