Grab 9% Yield: Top Dividend Stocks for Passive Income

High-yield dividend stocks can help to provide near-instant liquidity to cover living expenses, support personal financial goals, or be reinvested to accelerate wealth accumulation.

Numerous companies currently offer attractive dividend yields, which can serve as a supplementary income source. However, investors should prioritize stocks of companies with strong fundamentals, reliable earnings, and a proven history of consistent dividend payouts and growth.

In the current market landscape, two companies stand out: SFL Corporation (SFL) and Capital Southwest (CSWC). Each has a dividend yield exceeding 9% and a track record of solid payments.

Given the possibility of a lower interest rate environment ahead, let’s delve into why these high-yield dividend stocks could be a solid addition to your income portfolio.

SFL Corporation

SFL Corporation (SFL) is a leading player in the international shipping and maritime industry. It owns a vast and diverse asset portfolio that spans across shipping, offshore, and maritime infrastructure.

The company has an impressive track record of 82 consecutive quarters of dividend payouts. Moreover, SFL pays a quarterly dividend of $0.27 per share, translating into an attractive yield exceeding 9% at the current market price. For income-focused investors, this consistency in dividend payments and high yield reflects SFL’s strong commitment to returning value to shareholders.

SFL Corporation focuses on owning and managing modern maritime assets while securing long-term charter contracts with high-quality companies. This approach provides significant earnings stability, and reduces concentration risk by diversifying exposure across multiple shipping markets and customers. Further, with a diversified fleet of vessels, SFL is well-positioned to continually reinvest in its operations and maintain its impressive dividend payments.

It’s worth noting that SFL has bolstered its charter backlog by more than $2 billion so far this year. This reflects strategic vessel acquisitions and extensions of existing charters. The company now has a total charter backlog of nearly $5 billion, which will support future growth.

SFL has also developed a robust operational platform, enabling it to secure repeat business with key clients, diversify its asset mix, and expand its customer base. Further, the company recently announced an investment in five large newbuild container vessels, which will further strengthen SFL’s competitive positioning in the maritime sector.

In parallel with acquiring new assets, the company is also focusing on improving the operational efficiency of its existing fleet. SFL is upgrading several large container vessels, which are projected to reduce fuel consumption per transported container by nearly 20%. This focus on fuel efficiency contributes to lower emissions and positions SFL to benefit from future shifts in shipping rates and vessel values, particularly as newbuild costs have surged.

As the global shipping industry evolves, SFL’s investments in premium vessels and its focus on optimizing vessel performance are likely to yield significant long-term benefits for its shareholders.    

In summary, SFL Corporation offers solid dividend income backed by strong earnings visibility. With its diversified asset base, long-term charter contracts, and focus on operational efficiency, SFL remains well-positioned to deliver attractive returns.

Capital Southwest

Capital Southwest (CSWC) is a business development company that focuses on supporting the acquisition and growth of middle-market businesses. Its high loan originations, rigorous underwriting capabilities, and ongoing portfolio review process allow it to generate steady growth.

One of Capital Southwest's key catalysts is its strategic focus on underserved markets. The company targets investments in firms with strong market positions, proven operational performance, solid revenue generation, and reliable cash flow. This targeted approach helps CSWC deliver superior risk-adjusted returns, thereby enhancing shareholder value through consistent dividend payments.

Capital Southwest has a solid dividend track record. In the 12 months ending June 30, 2024, Capital Southwest reported a pre-tax net interest income of $2.76 per share and distributed $2.27 per share in regular dividends. Moreover, the company has paid a total of $4.01 per share in special and supplemental dividends since 2015.

Capital Southwest is expanding its total assets and consistently lowering its operating expenses as a percentage of total assets. This shows that the company’s operating leverage continues to improve, providing a solid base for future earnings and dividend payments.

Currently, Capital Southwest offers a regular quarterly dividend of $0.58 per share, which translates to an impressive yield of over 9%. This makes CSWC an attractive option for investors seeking high-yield and reliable income.