Are you looking for stocks that can provide considerable passive income without much risk? If so, there are a pair of dividend-paying stocks with yields above 8% at recent prices that you might want to look at.
Capital Hercules (NYSE:HTGC) And Altria Group (NYSE:MO) have met their dividend commitments and have steadily increased their quarterly payouts. Here’s why they could be great additions to your portfolio for almost anyone looking to increase their passive income stream.
Capital Hercules
Hercules Capital is a business development company (BDC), which means that it must return at least 90% of the profits it generates to shareholders in the form of dividends. While most BDCs focus on established businesses with positive cash flow, Hercules provides venture capital to start-ups in exchange for equity participation or warrants.
Many of Hercules Capital’s investments don’t work out, but those that succeed more than make up for losses. For example, software companies including Palantir and life sciences companies such as Axsome Therapeutic were former beneficiaries of Hercules’ seed capital.
Hercules does not rest on any laurels. So far this year, two unnamed holding companies have filed for initial public offerings (IPOs). Also during the first quarter, four more portfolio companies entered into lucrative M&A deals.
Hercules offers a standard quarterly distribution that has increased since 2010 and is currently set at $0.40 per share. BDC’s standard distribution offers a dividend yield of 8.1% at recent prices.
When companies started by Hercules with modest capital are acquired or successfully IPO, they can generate enormous profits. These cash flows are so unpredictable that Hercules also offers a supplemental 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 aligns with the current one, investors who purchase this BDC at recent prices could receive a 9.8% yield. Adding stocks to a diversified portfolio and hanging in there for the long haul seems like a simple way to increase 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 a stunning dividend yield of 8.4%.
Dividend yields rarely exceed 8%, unless investors are unsure about the company’s ability to continue increasing its payouts. Powerful brands like Marlboro have helped Altria Group raise its dividend 58 times over the past 54 years, but investors are nervous about cigarette sales, which are declining rapidly.
The Altria group shipped 16.45 billion cigarettes in the first quarter, 10% less than a year earlier. Total revenue in the period decreased only 1% year-over-year thanks to higher prices for the Marlboro brand and increased sales of smoke-free products.
Altria Group’s $12.8 billion investment in Juul finished in disaster, but it acquired a new e-steam startup called NJOY last year. It is the only pod-based system cleared for sale by the FDA, and sales are accelerating. During the six months ended December 31, 2023, Altria shipped 1.3 million NJOY devices. In the first three months of 2024, Altria has already shipped approximately 1 million NJOY devices.
Total revenue is down slightly, but the Altria group can still increase its earnings per share (EPS) by buying back many shares. As a result, management expects 2024 adjusted earnings per share to climb 2% to 4.5% year-over-year.
The dividend distributed by the Altria group may not increase very quickly. With a high yield to begin with and steady increases likely in the coming years, this stock could produce significant dividend income for patient investors.
Should you invest $1,000 in Hercules Capital right now?
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Cory Renauer holds positions at Axsome Therapeutics. The Motley Fool ranks and recommends Axsome Therapeutics and Palantir Technologies. The Mad Motley has a disclosure policy.
2 Reliable Dividend Stocks With Yields Above 8% You Can Buy With $100 Now and Hold Forever was originally published by The Motley Fool
