3 Dividend Stocks Yielding Over 8.5% to Buy With $1,000 Right Now -- and Hold for a Lifetime of Passive Income

Most stocks don't offer very appealing dividends these days, with the yield on the S&P 500 near a multi-decade low at around 1%. Investors seeking a higher yield often need to take on more risk, including the greater likelihood of a future dividend cut.

However, there are some lower-risk, higher-yielding investment options out there if you know where to look. Here are three companies yielding over 8%. Those high yields could enable investors to turn $1,000 into a lucrative passive income stream that could last a lifetime.

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Starwood Property Trust

Starwood Property Trust (NYSE: STWD) is a real estate investment trust (REIT). These entities must distribute at least 90% of their taxable income to investors to comply with IRS regulations. As a result, most REITs have higher yields. Starwood's is currently around 11.5%. At that rate, a $1,000 investment would generate $115 in annual dividend income.

The REIT has never cut its dividend since its 2010 IPO and has maintained its current payment level since 2014. One of the keys driving Starwood's dividend durability is its diversification. The mortgage REIT invests in commercial real estate-backed loans (52% of its portfolio), infrastructure loans (10%), residential loans (8%), and several other assets (10%). It also has a growing portfolio of owned properties (20%).

Starwood's latest diversification move was the acquisition of the net-lease real estate platform Fundamental Income Properties for $2.2 billion last year. It owns an expandable portfolio of properties secured by long-term leases (a 17-year weighted-average lease term and 2.2% average annual rent escalations). This platform will provide Starwood steadily rising income to support its high-yielding dividend.

Main Street Capital

Main Street Capital (NYSE: MAIN) is a business development company (BDC). Like REITs, BDCs must distribute at least 90% of their taxable income to comply with IRS regulations. As a result, they typically offer high yields.

Main Street meets this requirement by paying two dividends. The BDC pays a monthly dividend set at a sustainable level. As a result, Main Street has never reduced its monthly dividend. Instead, it has increased this payment 160% since its 2007 IPO, including for the last 12 quarters in a row. Additionally, Main Street periodically pays supplemental quarterly dividends to reach its required payout ratio. It has paid a supplemental dividend for 19 straight quarters. At the current annualized rate of these two payments, Main Street yields more than 8.5% at its recent share price.

The BDC primarily invests in loans to small private companies, generating interest income that it pays out through dividends. Additionally, Main Street Capital will make equity investments in some of its portfolio companies, which offer dividend income and potential capital appreciation. These equity investments have helped contribute to its growing dividend over the long term.

Western Midstream Partners

Western Midstream Partners (NYSE: WES) is a master limited partnership (MLP). These pass-through entities (MLPs send a Schedule K-1 Federal tax form each year) tend to have higher dividend yields due to their higher payout ratios and lower valuations resulting from the tax complexities of K-1s.

The MLP operates oil and gas pipelines, processing plants, and other energy midstream infrastructure. These assets generate stable cash flow backed by long-term contracts. That predictable cash flow supports Western Midstream's more than 8.5%-yielding distribution.

The company has increased its payout by 184% since 2021, following a 2020 payout reset aimed at strengthening its financial profile. It aims to deliver low-to-mid annual distribution growth going forward, fueled by organic expansion projects and acquisitions. Western Midstream plans to spend $850 million to $1 billion on maintaining and expanding its operations this year, including building the Pathfinder Pipeline and North Loving II gas processing plant. Additionally, it agreed to spend $1.6 billion to buy Brazos Delaware to strengthen its midstream footprint. These investments support its growing distribution.

Lower risk, high-yielding investments

Entities like REITs, BDCs, and MLPs tend to offer higher dividend yields. That makes them enticing options for investors seeking lucrative income streams. Starwood Property, Main Street Capital, and Western Midstream Partners have solid track records of paying sustainable dividends, making them ideal investments for those seeking to turn $1,000 into a durable stream of passive income.

Matt DiLallo has positions in Main Street Capital and Starwood Property Trust. The Motley Fool has positions in and recommends Starwood Property Trust. The Motley Fool has a disclosure policy.