My 3 Favorite Ultra-High-Yield Dividend Stocks to Buy in November

Keith Speights, The Motley Fool

Fri, Nov 1, 2024, 1:47 AM 4 min read

1. Ares Capital

Ultra-high is certainly the right description for Ares Capital's (NASDAQ: ARCC) forward dividend yield of 8.86%. With a yield so juicy, Ares doesn't have to generate much share price appreciation to deliver nice total returns.

Delivering great total returns is something Ares Capital has consistently done, by the way. Since its IPO in 2004, Ares' cumulative total returns have been more than 60% higher than the S&P 500's.

Ares Capital ranks as the largest publicly traded business development company (BDC). It provides financing to middle-market businesses. As a BDC, Ares must return at least 90% of its earnings to shareholders in the form of dividends to be exempt from federal income taxes.

The market for BDCs continues to grow. Ares Capital brings scale and expertise that attract middle-market companies looking for capital to grow their businesses. Its portfolio diversification and focus on larger, more resilient clients make me confident that Ares will perform well over the long term.

2. Enbridge

Enbridge (NYSE: ENB) offers a forward dividend yield of 6.52%. Even more impressive to me is that the company has increased its dividend for 29 consecutive years. I fully expect that streak to continue in 2025.

Energy infrastructure companies like Enbridge don't have to fork over such hefty dividends as Ares Capital does. However, the company's board and management team choose to do so because they know the dividend is highly attractive to investors.

Operating pipelines that transport crude oil, natural gas, and other hydrocarbons has been Enbridge's core business for years. But the company has also expanded into the gas utilities business. Thanks to its acquisitions, Enbridge believes it's now the largest natural gas utility company in North America.

I think Enbridge's pipeline and natural gas utility revenue will grow over the next decade and beyond even with the shift to clean energy. However, I like that the company has also built a strong renewable energy business.

3. Realty Income

Realty Income (NYSE: O) isn't similar to Enbridge, but two common denominators stand out. First, it pays an ultra-high dividend yield -- in this case, 5.16%. Second, like Enbridge, Realty Income has increased its dividend for 29 consecutive years.

The company also shares something in common with Ares Capital other than its lofty dividend yield. As a real estate investment trust (REIT), Realty Income must return at least 90% of its earnings to shareholders as dividends.

I love the resilience of Realty Income's business. Roughly 90% of its total rent is largely insulated from economic downturns. The REIT owns 15,450 properties leased to over 1,550 clients representing 90 industries. Realty Income has also been in business for 55 years, surviving and thriving through a wide range of market conditions.

This resilience is no accident. Realty Income carefully chooses its clients, looking for "mission critical" locations of companies with strong fundamentals that will sign long-term leases.

I think the REIT should deliver solid growth to go along with its consistent dividends. Realty Income has a great opportunity to consolidate large real estate markets in the U.S. and Europe. Data centers also present a great growth market for the company.

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Keith Speights has positions in Ares Capital, Enbridge, and Realty Income. The Motley Fool has positions in and recommends Enbridge and Realty Income. The Motley Fool has a disclosure policy.

My 3 Favorite Ultra-High-Yield Dividend Stocks to Buy in November was originally published by The Motley Fool

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