Black Friday Sale for Income Investors: These 3 Ultra-High-Yield Dividend Stocks Are Bargain Buys
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It's Black Friday, the biggest shopping day of the year. Shoppers across the country are elbowing their way through the crowds at stores in search of the best deals.
Are there any Black Friday sales for income investors? Actually, yes. You can even "shop" from the comfort of your own home or anywhere else you prefer. Here are three ultra-high-yield dividend stocks that are bargain buys.
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1. Ares Capital
What better to put you in the holiday spirit than a juicy forward dividend yield of around 8.7%? That's what you'll get with Ares Capital (NASDAQ: ARCC).
Such a high yield is par for the course with Ares. As a business development company (BDC), it must return at least 90% of earnings to shareholders as dividends to be exempt from federal income taxes. And as one of the best BDCs, Ares Capital continues to have plenty of earnings to pay those dividends.
This stock trades at roughly 10 times forward earnings. Ares Capital's attractive valuation isn't due to any underlying problems, though. The company's business remains strong.
In the third quarter of 2024, Ares made new investment commitments of around $3.9 billion with 23 new portfolio companies and 51 existing portfolio companies. Its investment-grade profile also improved, with Ares Capital boasting the highest credit ratings in the BDC sector.
Ares Capital has significantly outperformed the S&P 500 in total returns since its initial public offering (IPO) in 2004. With the growing demand for direct lending and Ares' solid risk management approach, I expect the stock will be able to keep up its winning ways over the next decade and beyond.
2. Enterprise Products Partners
Investing in Enterprise Products Partners (NYSE: EPD) could also be a smart move as you're recovering from eating too much on Thanksgiving Day. The midstream energy provider offers a forward distribution yield of 6.4%. Enterprise has increased its distribution for 26 consecutive years.
I think Enterprise Products Partners is another bargain. Its forward price-to-earnings ratio of 11.3 is well below the forward earnings multiple of nearly 15.2 for the S&P 500 energy sector. That's especially cheap for a company that has delivered an average return on invested capital of 12% over the last 10 years.
If you like management to have lots of skin in the game, Enterprise should be right up your alley. Roughly 32% of the company's units are owned by the management team of its general partner and affiliates. With this strong alignment with other unitholders' interests, it's not surprising that Enterprise Products Partners is conservatively managed and has a solid A-rated balance sheet.