3 Ultra-High Yield Stocks to Buy Now for Passive Income

Chasing yield when investing is a dangerous game. The highest-yielding stocks often have problems that cause their prices to fall and their yields to soar. But you can still find excellent stocks with ultra-high yields that are excellent companies to own.

Research by Wellington Management looked at dividend stocks over 92 years between 1930 and 2022. It found stocks offering high yields, but not the very highest, outperformed all others

That’s not all that surprising. Dividend stocks represent companies that are typically successful and profitable. They have proven themselves through numerous economic cycles. Investors should look for companies that are growing their payouts and providing rising income over time.

The three companies in this article offer yields that average 7.5% annually. That’s more than five times greater than the average 1.4% yield of the S&P 500 index. These are companies with very high dividend yields that you can comfortably buy and hold today.

Altria (MO)

Tobacco king Altria (NYSE:MO) first began paying dividends in 1928 and started regularly increasing the payout in 1969. The owner of the top-selling cigarette brand Marlboro has a 55 consecutive-year history of hiking its payout, which makes it a Dividend King. Over the past 10 years, MO stock has hiked the payout at a compound annual growth rate (CAGR) of 7%, which is fantastic for a mature company like Altria. The dividend currently yields 8.6% annually.

Cigarette smoking, of course, is on a decades-long secular decline. The U.S. Centers for Disease Control says the number of adults who smoke has declined from 20.9% of the population in 2005 to 11.5% in 2021. That suggests some 28 million Americans are still smoking and remains a large target audience for Altria.

The company is focusing on the future of tobacco, though. It recently completed the acquisition of NJOY, the third-largest manufacturer of electronic cigarettes. While it significantly trails British American Tobacco‘s (NYSE:BTI) Vuse brand of e-cigs as well as former Altria partner Juul Labs, when Altria begins an advertising full-court press, NJOY will begin stealing large swaths of reduced-risk product market share.

Energy Transfer (ET)

Master limited partnership (MLP) Energy Transfer (NYSE:ET) is an energy industry middleman. It operates a vast network of pipelines and storage facilities for the oil and gas industry. Its network can move oil and gas from just about anywhere in the lower 48 states to either coast as well as the northern border to the Gulf of Mexico. 

Many of Energy Transfer’s pipelines operate under long-term contracts. They may also have take-or-pay agreements, which means the pipeline operator gets paid regardless of whether or not the customer utilizes the agreed-upon capacity. It ensures steady cash flows regardless of the price of oil and gas. In turn, those cash flows allow ET stock to pay a reliable dividend that yields 8.3% annually.

Although MLPs like Energy Transfer are an investment class holding immense long-term income and profit potential, there are complex tax issues investors should consider before buying in. Energy Transfer is one MLP that deserves a place in your portfolio but make sure to understand it before moving forward.

VICI Properties (VICI)

VICI Properties (NYSE:VICI) is one of two major casino-related real estate investment trusts (REIT). The other one is Gaming & Leisure Properties (NASDAQ:GLPI).  VICI is arguably the better of the two.

Formed in 2017 when Caesar Entertainment (NASDAQ:CZR) spun off VICI to own the real estate under its casinos, the REIT has gone on to incorporate properties from other gaming companies as well. While 40% of its revenue is derived from Caesars, 35% comes from MGM Grand in Las Vegas, which is owned by MGM International (NYSE:MGM).

VICI doesn’t have as long of a dividend history as either Altria or Energy Transfer but it makes up for that with excellent dividend and free cash flow (FCF) growth. The payout has been increased at a CAGR north of 7% annually for the past five years while FCF has grown at a 43% CAGR. The dividend yields 5.8% annually.

Although VICI stock is down 15% from recent highs, Las Vegas is shattering revenue records. Casinos on the Las Vegas Strip hauled in a record $8.9 billion in 2023, or 57% of the statewide total. Visitors to the city topped 40.8 million. Look for the current year to be even better.

On the date of publication, Rich Duprey held a LONG position in MO stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.