For more than a century, the stock market has been a money machine for investors with a long-term mindset. Although the market has endured its fair share of corrections, no other asset class has come close to matching the annualized return of stocks over long periods.

With thousands of stocks and exchange-traded funds (ETFs) to choose from, there are countless ways for investors to generate wealth. But one of the most time-tested ways to compound your wealth on Wall Street is to invest in dividend stocks.

In The Power of Dividends: Past, Present, and Future, the researchers at Hartford Funds, in collaboration with Ned Davis Research, compared the returns of dividend stocks to non-payers over a 51-year period (1973-2024). Their data showed that dividend stocks ran circles around the non-payers on an annualized return basis (9.2% versus 4.31%, respectively), and did so while being less volatile than the benchmark S&P 500.

But investors don’t have to wait annually, semi-annually, or quarterly to be rewarded by income stocks. A few dozen publicly traded companies pay their dividends on a monthly basis, with a handful of these companies capable of sustaining supercharged payouts for the foreseeable future.

If you want to earn a safe 10.5% annual yield on your principal investment and be paid dividends on a monthly basis, split your initial investment three ways in the following ultra-high-yield dividend stocks.

AGNC Investment: 14.15% yield
Generally, the higher a company’s dividend yield, the more likely it is that investors are falling for a yield trap. Since yield is a function of payout relative to share price, a company with a struggle operating model and a falling share price can lure investors in with a high-octane but unsustainable yield. This isn’t a concern with mortgage real estate investment trust (REIT) AGNC Investment (AGNC), which has sustained a double-digit yield in all but one of the last 15 years.

Mortgage REITs are businesses that aim to borrow money at lower short-term rates and use this capital to purchase long-term assets, such as mortgage-backed securities (MBS), at higher yields. The goal is to maximize this gap (known as net interest margin) between the yield on assets owned less average borrowing rate. In other words, it means AGNC and its peers are highly sensitive to changes in interest rates and the Fed’s monetary policy.

While the central bank’s aggressive rate-hiking cycle from March 2022 to July 2023 was terrible news for mortgage REITs, its current approach is ideal. Mortgage REITs like AGNC Investment typically perform their best when the Fed is lowering interest rates and monetary policy moves are methodical and well-telegraphed. This allows mortgage REITs to borrow at lower lending rates while still locking in high-yielding MBSs.

Building on this point, a declining interest rate environment tends to have a positive impact on AGNC’s net interest margin and book value. Since the share price of mortgage REITs often hovers around their respective book value, it implies the potential for share price appreciation in addition to an annual yield that currently tops 14%.

Lastly, AGNC Investment has the lion’s share of its invested assets — 99% of its $82.3 billion investment portfolio — tied up in ultra-safe agency MBSs. An “agency” asset is protected by the federal government in the unlikely event of default. This added buffer allows AGNC to lever its investments in order to maximize profits.

Realty Income: 5.31% yield
A second super-safe monthly dividend payer that can, collectively, help you earn 10.5% annually is Wall Street’s premier retail REIT, Realty Income (O). Realty Income’s dividend payout is so fundamentally sound that “The Monthly Dividend Company®” is its registered trademark. It’s increased its dividend 132 times since going public in 1994.

Although the retail industry can be fickle, Realty Income has a few tricks up its sleeve to make these peaks and troughs more manageable. Namely, it focuses on brand-name, stand-alone businesses that typically drive foot traffic in any economic climate. Think drug stores, dollar stores, automotive stores, and grocery stores, to name a few key categories.

As of the end of June, Realty Income held more than 15,600 commercial real estate properties in its portfolio, with approximately 90% of its total rent estimated to be resilient to economic downturns and shielded from e-commerce pressures. This ensures steady funds from operations and has given Realty Income the confidence to expand beyond retail into other ventures, including gaming and data centers.

Another piece of the puzzle for Realty Income is its lease structure. Its weighted average lease term as of the midpoint of 2025 is nine years, with an above-industry-average occupancy rate. It typically locks in its tenants for long periods, with many reupping their leases at favorable rental rates to Realty Income.

Realty Income stock is also historically cheap. It’s currently valued at 13.2 times forecast cash flow in 2026, which represents a 17% discount to its average cash flow multiple over the last half decade.

PennantPark Floating Rate Capital: 12.11% yield
The third ultra-high-yield dividend stock capable of helping you generate a safe 10.5% annual yield with monthly payouts is small-cap business development company (BDC) PennantPark Floating Rate Capital (PFLT). Though PennantPark doesn’t increase its dividend often, it’s been consistently delivering a high-single-digit or low-double-digit yield.

BDCs are investors in small- and micro-cap companies (commonly known as middle-market companies) through debt and/or equity. As of June 30, PennantPark was overseeing a portfolio in excess of $2.4 billion, of which more than $2.15 billion is first lien secured debt. This makes it a primarily debt-focused BDC.

The advantage of focusing on debt is really simple: yield! Most of the companies PennantPark negotiates loans with have limited financing options. As a result, it’s able to net an above-average yield on its debt portfolio. As of the midpoint of 2025, its weighted average yield on debt investments was a cool 10.4%!

Something else that’s worked in PennantPark Floating Rate Capital’s favor, and which might be given away by its name, is that 99% of its loan portfolio sports variable rates. When interest rates soared from March 2022 to July 2023, PennantPark’s weighted average yield on debt investments jumped by more than five full percentage points at its peak. Even though the Fed is in a rate-easing cycle, the central bank is being methodical with its cuts, which has allowed PennantPark to meaningful grow its investment portfolio at still-favorable yields.

Rounding things out, this under-the-radar BDC has done a phenomenal job of protecting its principal. Its $2.4 billion portfolio, including equity investments, is spread across 155 companies, and all but $12.5 million of its loan portfolio is in first lien secured debt. First-lien debtholders are at the front of the line for repayment in the event of a bankruptcy.

— Sean Williams

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Source: The Motley Fool