Look into recent activity from some of the world's most successful investors to find passive-income stocks. In the fourth quarter of 2023, billionaire hedge fund manager Ken Griffin increased Citadel Advisors' Hercules Capital (NYSE: HTGC) investment.
Hercules yields six times the S&P 500 average dividend-paying stock. There are other ultra-high-yield stocks billionaires have been buying in droves. In Q4 2023, Israel Englander increased Millennium Management's position on Altria Group (NYSE: MO) by 51% to over 2.2 million shares.
Capital Hercules A business development corporation (BDC), Hercules Capital lets average people invest in promising digital and life science companies early. Some of its successful ventures include Axsome Therapeutics, Palantir Technologies, and Transmedics Group.
BDCs don't pay income taxes if they pay at least 90% of their revenues as a dividend, thus passive income investors enjoy them. Hercules pays a $0.40 quarterly cash dividend, yielding 8.8% at current prices.
Hercules Capital invests mostly in warranted, stock, and option debt. Since such assets' values are unpredictable, the BDC pays a supplemental dividend annually. In February, the latest was $0.32 per share, or $0.08 each quarter.
At recent levels, the stock yields 10.6% if next year's supplemental payout matches this year's. However, the extra payout varies annually. One year may be better than another because many of this BDC's hazardous ventures will lose money while others earn multibagger profits.
Investors seeking regular payouts rather than dividend hikes could consider Altria Group, which sells Marlboro in the U.S. Last August, the corporation boosted its dividend for the 58th time in 54 years. Although Altria's dividend distribution has only increased 22.5% over the past five years, it might potentially generate huge passive income. Its 9.5% yield is significant at current prices.
Smoking has declined for decades, but recent losses are worse than usual. Altria sold 9.9% less combustible cigarettes last year. The stock has a high yield because the market fears heavy competition from flavored e-vapor items like Elf Bar will kill profitability.
Many Elf Bar enthusiasts don't know the FDA banned flavored e-vapors in 2020. Despite ineffectual enforcement, the government agency has increased its efforts in recent months. The FDA and CBP seized 41 illegal e-vapor product shipments in December. The FDA has warned 61 brick-and-mortar and 19 internet merchants for selling illegal e-cigarettes this year.
Only three e-cigarette brands have FDA marketing permission, including NJOY, which Altria Group acquired in 2023. Altria Group reported 2.3% adjusted earnings growth last year despite illicit flavored e-cigarettes. This famous dividend payer could boost earnings by a mid-single-digit percentage in 2024 and beyond due to FDA taste restriction enforcement and NJOY's launch.
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