The Dow is hitting record highs, the S&P 500 is knocking on the door of a new record, and even the Nasdaq – after a brief stumble earlier this week – is marching back towards the stratosphere. It feels like easy money.
But you know what they say: Easy come, easy go.
Smart investors – the ones who stay wealthy during EVERY market – know that the real key to success is a steady stream of CASH, paid out every single month.
That's why today I'm going to tell you about two “underdog” stocks, flying under Wall Street's radar, that could pay you massive monthly dividends. These are the kinds of stocks that let you sleep soundly at night, knowing that you have a reliable source of income no matter what chaos is unfolding in the market.
Ares Capital: A Behemoth Paying Out Big
Let's start with Ares Capital (ARCC). If you're an income investor, you NEED to know about Business Development Companies (BDCs). As my colleague Cory Renauer explained over at The Motley Fool, BDCs are special investment vehicles that can avoid paying income taxes by distributing almost ALL of their profits to shareholders like you (Source).
Think about that for a second… almost all of their profits.
And Ares Capital is the biggest publicly traded BDC in the world. This is a company with a track record of success and a portfolio that would make even the most seasoned investor drool.
Right now, Ares Capital is paying out a juicy 9% dividend yield. To put that in perspective, if you invested $100,000, you'd be looking at $9,000 a year in income… or $750 a month. Not bad for a “boring” financial company!
But what makes Ares Capital a particularly compelling opportunity right now is its focus on lending to mid-sized companies. As Cory points out, U.S. banks have been pulling back from this kind of lending for decades, leaving a HUGE gap in the market (Source).
That means Ares Capital can charge HIGHER interest rates to businesses starved for capital, and those higher interest rates translate into bigger dividend payouts for you.
Now, of course, there's always some degree of risk with any investment. But Ares Capital has a few KEY advantages that make it a much safer bet than your average double-digit yield stock:
- Diversification: With a portfolio of $25 billion, spread across 525 different companies, Ares Capital isn't putting all its eggs in one basket. Even if one or two businesses go belly up, the impact on the overall portfolio is minimal.
- Experience: The folks running Ares Capital's investment team have been in the game for an average of 30 years, so they know how to spot a good investment and manage risk effectively.
- Strong Credit Rating: Ares Capital has an investment-grade credit rating, which means it has easy access to cheap capital. That gives it a crucial advantage during economic downturns.
PennantPark: Monthly Payouts For A Comfortable Retirement
But what if you really want to maximize your monthly income? That's where PennantPark Floating Rate Capital (PFLT) comes in. This BDC takes a slightly different approach, focusing on lending to even smaller companies than Ares Capital.
The result? A dividend yield that's even more enticing: 10.5%…and it pays out those dividends monthly. That's $875 a month on a $100,000 investment.
Imagine having that kind of cash flow hitting your account every single month. It could cover your mortgage payments, pay for your groceries, or maybe even fund a dream vacation!
But here's where PennantPark gets even more interesting… almost all of its loans are “floating-rate” loans. That means the interest rate it charges adjusts as interest rates rise. So as the Federal Reserve potentially lowers rates in the coming months, PennantPark is still likely to see its income increase, further supporting its ability to sustain and potentially grow its generous monthly payouts.
As with Ares Capital, PennantPark has a highly diversified portfolio and an experienced management team with a demonstrated commitment to dividend growth (Source). That makes these two BDCs a POWERFUL one-two punch for any income investor looking to build a fortress of wealth.
What You Should Do Now…
While the gurus on Wall Street are busy chasing the “next big thing” in tech and AI, I urge you to consider these two “underdog” stocks. While everyone else is riding the rollercoaster of market volatility, you'll be collecting a steady stream of monthly income, building wealth, and sleeping soundly at night.
Tomorrow, I'll reveal an even MORE surprising income investing strategy that could help you generate thousands in tax-free income. Stay tuned!