Are you looking for stocks that can provide a lot of passive income without much risk? If so, there are a few dividend-paying stocks with yields above 8% at recent prices that you might want to look at.
Hercules capital (NYSE:HTGC) And Altria Group (NYSE:MO) have met their dividend obligations and have steadily increased their quarterly payouts. This is why they can be great portfolio additions for just about anyone looking to boost their passive income stream.
Hercules capital
Hercules Capital is a business development company (BDC), which means it must pay out at least 90% of the profits it generates as dividends to shareholders. While most BDCs focus on established companies with positive cash flows, Hercules offers start-ups venture capital in exchange for an equity stake or warrants.
Many of Hercules Capital’s investments have no results, but the successful investments more than compensate for the losses. For example, software companies, including Palantir and life science companies such as Axsome Therapeutics were previous recipients of seed capital from Hercules.
Hercules does not rest on laurels. So far this year, two unnamed portfolio companies have filed for initial public offerings (IPOs). Also in the first quarter, four more portfolio companies agreed to lucrative merger and acquisition deals.
Hercules offers a standard quarterly distribution that has been increasing since 2010 and is currently set at $0.40 per share. The BDC’s standard distribution yields a dividend yield of 8.1% at recent prices.
When companies that Hercules has seeded with modest amounts of capital are acquired or make successful IPOs, they can create huge windfalls. These cash flows are so unpredictable that Hercules also offers a supplementary dividend that it adjusts annually.
Hercules Capital’s additional distribution is currently set at $0.08 per share per quarter. If next year’s additional distribution is in line with the current one, investors who purchase this BDC at recent prices could receive a 9.8% yield. Adding stocks to a diverse portfolio and holding on to stocks for the long term seems like an easy way to pump up your passive income stream.
Altria Group
Altria Group is the American tobacco company that markets the leading Marlboro brand. At recent prices, the stock offers an eye-popping dividend yield of 8.4%.
Dividend yields rarely rise above 8% unless investors are unsure of the company’s ability to continue increasing its payouts. Powerful brands like Marlboro have helped Altria Group increase its dividend payout 58 times over the past 54 years, but investors are nervous about cigarette sales, which have fallen rapidly.
Altria Group shipped 16.45 billion cigarettes in the first quarter, which was 10% less than a year earlier. Total sales fell just 1% year-on-year during the period due to higher prices for the Marlboro brand and rising sales of smokeless products.
Altria Group’s $12.8 billion investment in Juul ended in disaster, but last year it acquired a new e-vapor startup called NJOY. This is the only pod-based system approved for sale by the FDA, and sales are increasing. During the six-month period ending December 31, 2023, Altria shipped 1.3 million NJOY devices. In the first three months of 2024, Altria already shipped approximately 1 million NJOY devices.
Total revenue is down slightly, but Altria Group can still increase earnings per share (EPS) by buying back a lot of shares. As a result, management expects adjusted earnings per share to increase 2% to 4.5% year over year in 2024.
Altria Group’s dividend payout may not increase very quickly. With high yields early on and a steady climb likely to occur over the next few years, this stock could deliver huge dividend income for patient investors.
Should you invest $1,000 in Hercules Capital now?
Consider the following before purchasing shares in Hercules Capital:
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Cory Renauer holds positions at Axsome Therapeutics. The Motley Fool holds positions in and recommends Axsome Therapeutics and Palantir Technologies. The Motley Fool has a disclosure policy.
2 Reliable Dividend Stocks With Yields Above 8% That You Can Buy Now With $100 and Hold Forever Originally published by The Motley Fool
