Printed on October 17, 2025, by Nathan Parsh
Excessive-yield shares pay out dividends which can be considerably greater than the market common. For instance, the S&P 500’s present yield is barely ~1.2%, a product of report highs for the market.
Excessive-yield shares could be notably useful in shoring up earnings after retirement. A $120,000 funding in shares with a median dividend yield of 5% creates a median of $500 a month in dividends.
We’ve got created a spreadsheet of shares (and intently associated REITs and MLPs, and many others.) with dividend yields of 5% or extra…
You’ll be able to obtain your free full checklist of all excessive dividend shares with 5%+ yields (together with necessary monetary metrics comparable to dividend yield and payout ratio) by clicking on the hyperlink beneath:
You’ll be able to obtain your free full checklist of all excessive dividend shares with 5%+ yields (together with necessary monetary metrics comparable to dividend yield and payout ratio) by clicking on the hyperlink beneath:
The subsequent article on this sequence will overview Stellus Capital Funding Corp. (SCM).
Enterprise Overview
Stellus is a Enterprise Improvement Firm, or BDC, that views itself as a versatile supply of capital for the center market. The corporate invests in small, predominantly non-public corporations which can be often at an early stage of their development cycles.
Stellus is a middle-market funding agency that makes fairness and debt investments in non-public middle-market corporations. The corporate supplies capital options to corporations with $5 million to $50 million of EBITDA and does so with varied devices, nearly all of that are debt.Stellus supplies first lien, second lien, mezzanine, convertible debt, and fairness investments to a various group of consumers, typically at excessive yields, within the US and Canada.
Supply: Investor Presentation
Stellus has a extremely diversified funding portfolio, each by way of trade and geography focus. The corporate gives quite a lot of debt investments, together with first lien, second lien, uni-tranche, and mezzanine financing.
Invested capital is used for a variety of functions, together with acquisitions, development investments, and extra. The investments are positioned in varied industries, together with enterprise companies, industrial, healthcare, expertise, vitality, shopper merchandise, and finance. Stellus is externally managed by Stellus Capital Administration LLC, a registered funding advisor.
The corporate follows a disciplined funding technique. For instance, it closed solely about 2% of offers reviewed over the previous few years. Its relative selectiveness permits the corporate to deal with the highest-quality investments.
It additionally means the corporate has much more funding alternatives than it wants, enhancing its skill to pick solely the very best investments. Stellus generates notably excessive yields from its first lien, second lien, and unsecured debt investments. The weighted common yield as of the latest quarterly report was 10.3%.
Progress Prospects
A powerful catalyst for Stellus is its rising funding portfolio. Over the previous 5 years, Stellus has seen its portfolio rise quickly, permitting the corporate to earn greater funding earnings.
Nonetheless, this all stopped in 2020 because the coronavirus pandemic despatched the U.S. economic system right into a deep recession, negatively impacting a lot of Stellus’ investments.
Stellus reported second-quarter outcomes on August seventh, 2025, with outcomes near the market’s expectations. Internet funding earnings was $0.34, whereas core internet funding earnings of was $0.35. This was down in comparison with the prior 12 months, nonetheless. Complete funding earnings of $25.7 million decreased from $26.6 million final 12 months.
Gross bills climbed $600K, or 3.6%, from final 12 months, whereas charges and bills associated to borrowings elevated from $3.9 million to $4.3 million.
The corporate funded $15 million of latest investments, ending the quarter with a complete portfolio truthful worth of $986 million.
We count on that internet funding earnings will decline 20.7% to $1.30 in 2025.
Aggressive Benefits & Recession Efficiency
Like many BDCs, Stellus doesn’t profit from important aggressive benefits. The corporate gives the identical varieties of merchandise that different BDCs do to the same set of consumers. We really feel that makes it exhausting for BDCs to tell apart themselves an excessive amount of from the trade. Moreover, BDCs usually endure throughout recessions as a result of debtors have a tougher time assembly compensation timelines.
Stellus was not round through the 2007 to 2009 interval, because it was not fashioned till 2012. That mentioned, internet funding earnings dipped from $1.23 to $1.13 in 2020, earlier than making a brand new excessive in 2022. This was a good consequence in comparison with many BDCs throughout that interval.
One space of concern is that Stellus continues to dilute its share rely. The share rely greater than doubled between 2015 and 2024. We mission that the share rely will greater than triple from 2015 to 2030, which can probably act as a headwind to internet funding earnings and will put the dividend in danger.
Dividend Evaluation
Stellus, like most BDCs, gives a really excessive yield, which is 13.4% at present.
Supply: Investor Presentation
Stellus at present pays a month-to-month dividend of $0.1333 per share, equating to an annualized payout of $1.5996. The corporate reduce its dividend in mid-2020 because of the pandemic, which was probably a prudent transfer throughout that interval.
Stellus has paid out particular distributions up to now to complement its engaging month-to-month dividend additional, however this final occurred in 2022.
The principle cause traders are drawn to BDCs is that they usually present excessive charges of earnings, and Stellus isn’t any totally different. These excessive yields usually include dangers. Stellus is anticipated to see a sizeable decline in NII in 2025, with the projected payout ratio at 123% for this 12 months. The payout ratio has sometimes been elevated with Stellus, however this could be the best fee in additional than a decade and the primary time since 2019 that it exceeded the 100% threshold.
Subsequently, it’s fairly potential that Stellus can be compelled to chop its dividend if internet funding earnings doesn’t return to development.
Remaining Ideas
Stellus has a reasonably diversified enterprise mannequin and survived the worst of the Covid-19 pandemic a lot better than a lot of its fellow BDCs.
The 13%+ yield might be attractive for earnings traders, however the yield won’t be protected from a possible reduce on condition that Stellus is projected to payout extra in dividends than it generates in internet funding earnings.
We recommend that solely probably the most risk-tolerant traders contemplate proudly owning shares of Stellus.
Excessive-Yield Particular person Safety Analysis
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