For those seeking a lucrative passive income stream to fuel their retirement goals, finding high-yield dividend stocks has become increasingly challenging. As the S&P 500 has surged 31% over the past year, the average dividend yield has dwindled to a mere 1.3%. However, two exceptional business development companies (BDCs) stand out for their impressive yields above 9%: Ares Capital (NASDAQ: ARCC) and PennantPark Floating Rate Capital (NYSE: PFLT).
Ares Capital, the world’s largest publicly traded BDC, boasts a remarkable 9.2% dividend yield. Since 2005, its dividend payout has grown by 60%. With a diverse portfolio of debt securities yielding 12.2% at cost, Ares Capital’s low cost of capital and robust earnings have enabled it to maintain its high-yield dividend payments.
PennantPark Floating Rate Capital offers an even more enticing 10.7% yield. This BDC has consistently made monthly dividend payments since 2011, with a brief exception in 2018. Its portfolio is heavily weighted towards first-lien senior secured loans, providing an added layer of security for investors. With a diverse range of investments and a strong underwriting team, PennantPark Floating Rate Capital is well-positioned to sustain its high-yield dividend payments.
Both Ares Capital and PennantPark Floating Rate Capital have demonstrated their ability to generate reliable cash flows, making them attractive options for income-seeking investors. While there are no guarantees, their robust portfolios and financial performance suggest they can maintain their high-yield dividend payments over the long term.
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