2 Stocks That Yield 12% and Higher Are Passive Income Kings

"Dividend investing has long demonstrated its value, consistently outperforming broader market benchmarks over multiple decades. Studies from sources like Ned Davis Research show that dividend-paying stocks have delivered annualized returns around 9% since the 1970s, compared to just 4% for non-dividend payers, thanks to the compounding effect of regular payouts and lower volatility. While higher yields can amplify these advantages, providing a larger income stream to reinvest or spend,"

"A sky-high payout often signals underlying issues, such as unsustainable business models, excessive debt, or sector headwinds that could lead to dividend cuts or capital erosion. Historical examples abound: companies like the old General Electric slashed dividends after yield-chasing investors piled in, only to watch share prices plummet. More recent examples include former Dividend Aristocrats 3M ( ) and Walgreens Boots Alliance ( ) that had yields of 6.6% and 7.5%, respectively, just prior to cutting their payouts in half."

"Annaly Capital Management (NLY) stands out as a leading mortgage real estate investment trust, or mREIT, specializing in agency mortgage-backed securities guaranteed by government entities like Fannie Mae and Freddie Mac. This focus minimizes credit risk, allowing the company to prioritize interest rate spreads for income generation. With a current yield hovering at 13.56% based on its $2.80 annual dividend, NLY offers substantial passive income potential for patient investors."

Dividend-paying stocks have delivered higher long-term returns and lower volatility than non-dividend payers, benefiting from compounding regular payouts. Higher yields increase income for reinvestment or spending but can signal fundamental problems when exceptionally large. Excessive yields may reflect unsustainable business models, high leverage, or sector headwinds that precede dividend cuts and capital losses. Historical instances show companies with inflated yields later slashed payouts and suffered share price declines. Effective dividend investing requires balancing yield with durability by focusing on firms with strong cash flows, conservative leverage, and consistent payout histories. Annaly Capital Management (NLY) exemplifies a high-yield mREIT focused on government-guaranteed agency mortgage-backed securities, offering a 13.56% yield.

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