Investing $3,000 Into These 3 Ultra-High-Yielding Dividend Stocks Could Generate Hundreds of Dollars in Annual Passive Income

The S&P 500 currently has a rather pedestrian dividend yield of around 1.1%. That's near its record low. As a result, you'd only generate about $34 of annual passive income by investing $3,000 into an S&P 500 index fund.

Several companies offer dividend yields well above the market average. That enables you to generate a lot more income from the same investment. For example, investing $3,000 into the following three ultra-high-yielding dividend stocks would produce hundreds of dollars in passive income each year:

Data source: Google Finance and the author's calculations.

Here's a closer look at this trio of high-yielding dividend stocks.

Image source: Getty Images.

AGNC Investment

AGNC Investment is a real estate investment trust (REIT). It invests exclusively in Agency mortgage-backed securities (residential mortgage pools guaranteed against losses by government agencies such as Fannie Mae). These fixed-income investments have lower risk profiles and offer lower returns (low-to-mid single-digit yields).

The mortgage REIT boosts its returns with leverage. For example, its portfolio earned a 16% return on equity in the fourth quarter. That's high enough to cover its operating costs and high-yielding monthly dividend.

The REIT can maintain its current dividend level as long as its returns remain in alignment with its costs. That has been the case for the past five years. Right now, the investment environment is very positive. That bodes well for AGNC Investment's ability to continue paying its currently very lucrative dividend.

Ares Capital

Ares Capital is a business development company (BDC). It provides capital (primary loans) to private middle market companies ($100 million to $1 billion in annual revenue). It's the largest BDC, with $29.5 billion invested across 600+ portfolio companies. Ares' investment portfolio currently has a weighted average yield of 9.3%. This interest income supports its lucrative dividend.

The BDC routinely raises additional capital to grow its portfolio. Ares made $5.8 billion of new investment commitments across 30 new and 84 existing portfolio companies last quarter, partially offset by $4.7 billion of exited investments. The company raised a record $4.5 billion of new gross debt commitments last year to support its growing portfolio.

Ares' growing portfolio has enabled it to pay a stable or growing dividend for over 16 consecutive years. The company currently generates earnings in excess of its dividend, providing a sustainable foundation for its hefty payout.

Western Midstream Partners

Western Midstream Partners is a master limited partnership (MLP), an entity that sends a Schedule K-1 Federal tax form each year. The company operates energy midstream assets, including pipelines and processing plants, to support oil and gas production. Most of its assets operate under long-term, fixed-rate contracts, providing it with stable cash flows.

The MLP generated enough cash flow last year to cover its distribution and the capital expenditures to maintain and expand its midstream assets with $95 million to spare. That excess free cash flow enhanced its financial flexibility. It used some of its financial capacity to acquire Aris Water Solutions.

Western Midstream plans to invest up to $1 billion in capital expenditures this year. Its growth-related spending will help grow its cash flow in the future. That should support continued distribution increases. Western Midstream raised its distribution by 4% last year and plans to increase it by another 2.2% in 2026, aligning with its target of delivering low-to-mid single-digit annual distribution growth.

Big-time income stocks

AGNC Investment, Ares Capital, and Western Midstream have huge dividend yields. They all have solid records of at least maintaining their dividend payments in recent years, which should continue as long as there isn't a meaningful market disruption. That makes them enticing options for those seeking to turn $3,000 into hundreds of dollars in annual passive income.

Matt DiLallo has positions in Ares Capital. The Motley Fool has positions in and recommends Ares Capital. The Motley Fool has a disclosure policy.