My 5 Favorite Ultra High Yield Stocks to Buy for 2025

On December 30, 2024By Littum

I like every part of the phrase “ultra-high yield dividend stocks.” Investing in shares allows me to own parts of large companies. Dividends pay me for owning the shares. And thinking about dividends with ultra-high yields makes me smile.

The new year presents a great opportunity for investors who share my appreciation for these kinds of stocks. Here are my five favorite ultra-high yield stocks to buy for 2025 (listed alphabetically).

Capital of Ares (NASDAQ: ARCC) ticks several boxes for me. Its forward yield of 8.72% is particularly attractive. I see Ares Capital’s valuation as attractive with shares trading at just 10 times forward earnings. I also like that the stock has fallen S&P 500 index over the long term based on total returns.

But what I love most about Ares Capital is that it appears to be in a strong position to continue to win and continue to pay those juicy dividends. Ares Capital ranks as the largest listed company business development corporation (BDC). The market for BDCs — and Ares in particular — is growing with increased demand for loans among middle-market companies and a continuing shift to private equity.

Enbridge (NYSE: ENB) pays a forward dividend of 6.44%. Even better, the company has increased its dividend for an impressive 30 consecutive years. I expect that streak to continue, with Enbridge forecasting its undistributed cash flow to grow at a compound annual growth rate of about 3% through 2026 and by about 5% in subsequent years.

The company remains one of the top players in the midstream energy industry with pipelines across the United States and Canada. But Enbridge is also now the largest natural gas utility in North America thanks to recent acquisitions. The markets it serves have growing populations and significant opportunities to provide power to data centers.

Another midstream conductor, Enterprise Products Partners (NYSE: EPD)gives an even higher forward rate of 6.76%. The company’s track record is also not far behind Enbridge’s, with 26 consecutive years of distribution increases.

I suspect 2025 will be a great year for midstream energy stocks with the incoming Trump administration’s promise to “drill, baby, drill.” Even if that’s not the case, Enterprise Products Partners should generate solid cash flow to fund the distribution. The company has an exceptional track record of sustainable cash flow in both good and bad conditions for the energy sector.

Honda engine (NYSE: HMC) did not give positive returns in 2024. However, the industrial giant pays a rich dividend of 4.94%. It also rewarded the shareholders throughout share buyback. And with a forward earnings multiple of just 6.75, Honda is cheap in a market jam-packed with stocks at a steep premium.

The company’s business continues to perform fairly well overall, with solid year-on-year sales growth for its motorcycle, automotive and financial services units. Honda is poised to become even more competitive against Toyota and Chinese automakers with its pending acquisition of Nissan. In particular, this deal could help Honda compete more effectively in the electric car market. If the transaction doesn’t hit any roadblocks, the merger of Honda and Nissan would create the world’s third-largest automaker.

Pfizer (NYSE: PFE) is another poor performer in 2024 who I think can be a solid winner going forward. Meanwhile, the major drugmaker offers an attractive forward dividend yield of 6.46%. Pfizer’s management consistently ranks dividend maintenance and growth as its top capital allocation priority—something income investors especially like to hear.

I am fully aware of Pfizer’s challenges, including a steep drop in COVID-19 product sales and a looming patent cliff. However, I see this pharma stock as a diamond in the rough. Pfizer has several newer products that should drive growth over the next few years. It’s also a bargain, with shares trading below 9 times forward earnings and a super-low price-to-earnings-to-growth (PEG) ratio based on five-year growth projections of 0.2, according to LSEG.

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Keith Speights holds positions at Ares Capital, Enbridge, Enterprise Products Partners, Honda Motor and Pfizer. The Motley Fool has positions in and recommends Enbridge and Pfizer. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has one disclosure policy.

My 5 Favorite Ultra High Yield Stocks to Buy for 2025 was originally published by The Motley Fool