For patient investors, there is no shortage of strategies that can successfully build wealth on Wall Street. But of these strategies, perhaps none is more fruitful than buying dividend-paying stocks.

Nine years ago, JP Morgan Asset Management, which is a division of the nation’s largest bank by market capitalization, JPMorgan Chase, published a report examining the performance of non-paying dividend stocks over four decades (1972-2012). Over this 40-year period, dividend stocks have averaged an annual return of 9.5%. This means that investors were doubling their money every 7.6 years. Meanwhile, non-dividend stocks clawed their way to a paltry 1.6% annualized return.

Since companies that regularly pay a dividend are often profitable, proven, and have transparent growth prospects, these are exactly the type of stocks investors will flock to during times of heightened market volatility.

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The following three ultra-high yield dividend stocks – “ultra high yield” is an arbitrary term I use to describe income stocks with a yield of at least 7% – can all be purchased with confidence by applicants income in May.

AGNC Investment Corp. : yield of 11.6%

The first supercharged dividend stock just begging to be bought in May is the mortgage real estate investment trust (REIT) AGNC Investment Corp. (AGNC -1.21%).

AGNC is a monthly dividend payer that has averaged double-digit returns for 12 of the past 13 years. Even though the company’s share price has fallen 36% since its stock market debut 14 years ago, investors have seen a total return of 351% when considering dividends paid. In some context, this total return of 351% is 58 percentage points better than the benchmark’s total return S&P500 since AGNC became a publicly traded company.

Mortgage REITs like AGNC seek to borrow money at the lowest possible short-term rate and use that capital to buy higher-yielding long-term assets, such as mortgage-backed securities (MBS). The concern at the moment, and the reason why AGNC shares have been crushed in recent months, is that rapidly rising interest rates will increase its short-term borrowing costs. When coupled with a flattening yield curve, the company is likely to see its net interest margin (the difference between the average return on its owned assets minus the average borrowing rate) and its value accountant decrease.

However, the headwinds AGNC faces are historically short-term in nature. Although the yield curve has flattened, it spends much longer steepening during economic recoveries and periods of expansion. In addition, AGNC should benefit from higher returns on the MBS it purchases as interest rates rise. In other words, patient investors should see the company’s net interest margin increase in the coming years.

Another big key to AGNC Investment’s success is to stick with agency titles. At the end of March, $66.9 billion of the company’s $68.6 billion investment portfolio was in agency assets. An “agency” title is guaranteed by the federal government in the unlikely event of default. While this additional protection reduces the return on MBS purchased by AGNC, it also allows the company to deploy leverage to increase its profit potential.

Traditionally, shares of mortgage REITs remain close to their respective tangible net book values ​​(TNBV). With AGNC priced at 5% off its TNBV and sporting an 11.6% yield, it looks like a screaming buy among ultra-high-yielding dividend stocks.

A nurse monitoring a patient in a residence for the elderly.

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Sabra Health Care REIT: yield of 9.08%

A second important income stock that can be bought in spades in May is Sabra Healthcare REIT (SBRA -1.59%). The company’s 9.1% return is about the middle of what shareholders expect over the five-year period.

At the end of the March quarter, Sabra owned and leased 416 healthcare properties nationwide. Specifically, Sabra’s portfolio consists of skilled nursing facilities and senior residences.

As you can probably guess, Sabra struggled mightily during the early stages of the pandemic. Wall Street and investors were clearly concerned that the company would receive rent from its tenants. It also didn’t help that older people were hit harder by COVID-19 than other age groups.

Thankfully, much of the worst-case scenario chatter about Sabra never materialized. Through March 2022, the company has collected 99.5% of projected rents since the start of the COVID-19 pandemic. We have also seen a fairly steady rebound in the occupancy rates of residences for the elderly and qualified nurses since the beginning of last year.

To capitalize on this point, Sabra Health Care was able to amend its head lease agreement with one of its major tenants, Avamere, in February. The newly amended agreement gives Avamere more leeway on the payments front. In the meantime, it allows Sabra to collect more future rent if Avamere’s operating performance rebounds significantly. With Avamere making its payments, a big gray cloud no longer hangs over Sabra.

If you need another good reason to trust Sabra Health Care REIT for the long term, consider this: the baby boomer population is aging and will likely require additional care in the years and decades to come. Going forward, Sabra’s rental pricing power should only get better.

An excavator placing materials into the back of a dump truck in an open pit mine.

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Alliance Resource Partners: return of 7.31%

The third and final ultra-high-yielding dividend stock to buy by hand in May is a mining company Alliance Resource Partners (ARLP -8.09%). Yesa coal mining company.

Although coal stocks were devastated by high debt levels and a major drop in demand due to pandemic-related lockdowns, Alliance Resource Partners thrived. Since its initial public offering (IPO) in August 1999, Alliance Resource Partners’ shares have more than quadrupled. But if you take into account the company’s incredible dividend, it has generated a total return of nearly 2,200% since its IPO.

Although coal stocks are facing a surge as most countries focus on reducing their carbon footprint and fighting climate change, Alliance Resource Partners has a few advantages. For example, the company has a debt ratio of 36.8%, which is significantly lower than that of its peers. Management’s historically conservative approach to spending has given Alliance Resource Partners financial flexibility at a time when many of its peers do not have that luxury.

Another reason Alliance Resource Partners has been so successful is the volume and price commitments the company is committed to meeting. Until the end of March, almost all of the company’s planned production for 2022 (35.5 million tons to 37 million tons) is announced. However, 19.9 million tonnes are locked at specific price levels for 2023 as well. Last quarter, the company booked production through 2025. This provides highly predictable cash flow in an industry known for wild price volatility (at least in recent years).

But Alliance Resource Partners is not limited to coal. The company also holds royalties on oil and gas assets. As crude oil and natural gas hit multi-decade highs, Alliance Resource can expect a sharp increase in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from its royalty segment.

The icing on the cake is that management plans to increase the company’s distribution by 10% to 15%. per quarter for the remainder of 2022. This comes after an announced 40% increase in the company’s distribution following its first quarter operating results.

Coal stocks may not be sexy investments, but Alliance Resource Partners continues to find ways to satisfy its shareholders.