By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panel consensus is bearish on AGNC, ARCC, and WES due to high risk premia, sensitivity to interest rate volatility, and potential dividend sustainability issues. AGNC's 2025 swap roll-off is the most pressing concern.
Risk: AGNC's $8.2B notional swap book rolling off in 2025, potentially spiking effective duration and cratering net interest margin.
Opportunity: None identified by the panel.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
The S&P 500 currently yields only about 1%, near its lowest level in more than 20 years. Many stocks offer even lower yields.
However, there are some big-time yields out there for those seeking a more lucrative income stream. Here are three ultra-high-yielding dividend stocks to buy this month, including one that yields over 13.5%.
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AGNC Investment
We'll start at the top with AGNC Investment (NASDAQ: AGNC), which currently yields more than 13.5%. The real estate investment trust (REIT) pays a monthly dividend, making it even more appealing to income-seeking investors.
The REIT exclusively invests in Agency MBS, pools of residential mortgages guaranteed against credit losses by government agencies such as Fannie Mae. Agency MBS are low-risk, fixed-income investments. AGNC Investment uses leverage to boost its returns, though that also increases its risk profile.
AGNC Investment has paid its current dividend for 75 straight months. Despite a challenging investment environment, it's in a strong position to continue paying its monster monthly dividend. It can currently generate mid-to-high double-digit leveraged returns on new MBS investments, which aligns well with its current dividend level.
Ares Capital
Ares Capital's (NASDAQ: ARCC) dividend yield is approaching 10%. The business development company (BDC) has paid a stable or growing dividend for 17 straight years.
The BDC is a leader in providing direct loans and other investments to private middle market companies ($500 million to $1 billion in revenue). While these higher-yielding loans have higher risk profiles, Ares has a terrific underwriting track record. Ares annualized net realized loss rate is less than 0% across more than $73 billion of realized investments. That's better than banks (-0.6%) and its BDC peers (-1.1%).
While Ares Capital's core earnings have dipped below its dividend during the first half of this year ($0.47 per share in the first and second quarters compared to its $0.48 per share quarterly dividend payment), its big-time payout isn't at risk. It also recorded a net realized gain of $0.14 per share so far this year. Additionally, it carried forward $1.38 per share of excess taxable income from last year for distribution in 2026. Add in its healthy portfolio and balance sheet, and it's in a solid position to maintain its streak of dividend stability and growth.
Western Midstream Partners
Western Midstream Partners (NYSE: WES) currently yields almost 8%. The master limited partnership (MLP), which sends a Schedule K-1 Federal tax form each year, has increased its distribution 193% since its reset in 2020 to strengthen its financial profile. Its distribution level is now well above its prior peak and has grown about 420% since its formation in 2012.
The MLP invests in energy midstream infrastructure, such as pipelines and processing plants, backed by long-term, fixed-rate contracts. That provides it with stable cash flow to fund its distribution and growth initiatives. Western Midstream expects to produce between $2.1 billion and $2.3 billion of distributable cash flow this year and $1.1 billion to $1.3 billion of free cash flow after funding capital projects, 75% of which will be on expansion-related initiatives such as its North Loving II plant and Pathfinder Pipeline.
Western Midstream also has the financial flexibility to make accretive acquisitions. It bought Brazos Delaware for $1.6 billion earlier this year. Its expansion investments should support 4% to 5% annual earnings growth over the long term. That should give the MLP the fuel to increase its distribution at a low- to mid-single-digit rate each year.
Monster income stocks
AGNC Investment, Ares Capital, and Western Midstream Partners stand out for their ultra-high-dividend yields. While they're riskier income investments, all three have a proven track record of paying a stable-to-growing dividend in recent years. With those trends likely to continue, they're ideal dividend stocks to buy this August for those seeking to seriously boost their passive income.
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Four leading AI models discuss this article
"Ultra-high yields here compensate for material leverage, coverage, and sector risks the article understates rather than signal obvious bargain income."
AGNC (13.5% yield), ARCC (~10%), and WES (~8%) look attractive on headline yield versus the S&P 500’s 1%. AGNC’s leveraged Agency MBS book benefits from wider spreads but remains hypersensitive to rate volatility and book-value erosion. ARCC’s underwriting track record is genuine, yet its dividend coverage slipped below 1x in H1 while relying on realized gains and carry-forward income. WES offers more stable midstream cash flows and visible 4-5% growth, but MLP tax complexity and energy-sector concentration persist. The article glosses over duration risk, leverage amplification in a potential recession, and the fact that these yields largely reflect elevated risk premia rather than mispricing.
If the Fed begins cutting rates aggressively and credit losses stay near zero, AGNC’s book value could rebound sharply while ARCC and WES maintain payouts, delivering both high income and capital appreciation that would make the article’s bullish case look conservative.
"High-yield vehicles like AGNC often mask structural capital erosion with high payouts, making them poor substitutes for true income growth in a volatile rate environment."
Investors chasing double-digit yields like AGNC (13.5%) are often ignoring 'yield traps' where the underlying asset value erodes faster than the dividend pays out. AGNC’s reliance on high leverage to arbitrage Agency MBS spreads is extremely sensitive to interest rate volatility and yield curve inversions; if the Fed fails to cut rates as expected, their book value will face further pressure. Meanwhile, ARCC’s dividend coverage is currently razor-thin, relying on realized gains to patch income shortfalls. While WES offers more stability via midstream infrastructure, investors must account for the tax complexity of K-1 filings. These aren't 'passive income' plays; they are high-beta bets on macro stability.
If we enter a 'soft landing' scenario with falling rates, the net interest margin for AGNC could expand significantly, potentially driving both dividend sustainability and capital appreciation.
"Ultra-high yields in a 5%+ rate environment typically signal distressed valuations and deteriorating fundamentals, not hidden opportunities."
This article conflates yield with value—a dangerous equation when rates are elevated. AGNC's 13.5% yield screams 'price has collapsed,' not 'buy me.' Agency MBS REITs are duration-negative in a higher-for-longer rate regime; if the Fed cuts aggressively, sure, rates fall and MBS prices recover—but that's a timing bet, not income stability. ARCC's core earnings ($0.47/quarter) already trail its $0.48 dividend; it's cannibalizing retained earnings and prior-year taxable income carryforwards. WES is the only genuinely defensible name here—contracted cash flows and 4-5% growth support an 8% yield—but even MLPs face headwinds if energy demand softens. The article's 'proven track record' language is backwards: these yields exist *because* valuations compressed, not because fundamentals improved.
If the Fed pivots to rate cuts within 6-12 months, AGNC and ARCC could see significant capital appreciation on top of yield, making the timing fortuitous rather than reckless; WES's contracted midstream model genuinely de-risks the distribution.
"Ultra-high yields in AGNC, ARCC, and WES are unlikely to be sustainable without dividend cuts or capital losses, creating meaningful downside risk despite the current income appeal."
The piece pushes three ultra-high-yield names (AGNC, ARCC, WES) as August buys, but the apparent income may come with outsized risk. AGNC’s 13%+ yield relies on leverage and favorable MBS dynamics; a rise in rates, prepayment shocks, or tighter leverage conditions could compress earnings and trigger dividend cuts. ARCC and WES offer strong historical payouts, yet credit-cycle risk (BDC loans, energy infrastructure) and tax/structure frictions (MLP K-1s) can erode real after-tax income and total return. The article glosses over dividend coverage, payout sustainability, and price volatility, which are crucial for investors chasing income over the long run.
Critics could argue that these yields compensate for real risk, and if rates stabilize or fall, cash flows may hold up and payouts remain intact; in a milder downturn, the income thesis could still work. The concern is whether the high payouts are sustainable under plausible rate and credit scenarios.
"Carryforwards are real but AGNC's 2025 swap maturities create a hidden duration cliff nobody has quantified."
Claude correctly flags ARCC's sub-1x coverage yet underplays how its $1.6B+ of undistributed taxable income carryforward actually funds the gap legally. The real unmentioned risk is AGNC's $8.2B notional swap book rolling off in 2025—potentially spiking effective duration if rates stay volatile. WES remains the cleanest, but nobody has addressed rising midstream maintenance capex eating into future distribution growth.
"AGNC faces a structural margin collapse in 2025 due to swap roll-offs, rendering the current yield unsustainable regardless of near-term rate cuts."
Grok, your focus on AGNC’s 2025 swap roll-off is the critical catalyst everyone else missed. While others debate yield traps, the real danger is the cliff-edge in hedging costs. If those swaps roll off into a still-volatile rate environment, AGNC’s net interest margin will crater regardless of Fed policy. I agree with Claude that WES is the only defensive play, but the maintenance capex cycle is the silent killer of that 4-5% dividend growth projection.
"AGNC's 2025 swap roll-off is a known catalyst, but its dividend-cut probability hinges on leverage flexibility, not just rate volatility."
Grok and Gemini both cite AGNC's 2025 swap roll-off as a cliff-edge risk, but neither quantifies the actual impact. If $8.2B notional rolls at current volatility premiums versus 2024 entry costs, we're talking 50-150bps of margin compression—material but not catastrophic if rates stabilize. The real question: does AGNC have capacity to absorb that hit without cutting the dividend, or does management pre-emptively de-lever? That's the binary nobody's modeling.
"AGNC's 2025 swap roll-off is a real risk, but stressed-scenario modeling and mitigations could keep the dividend defensible."
Grok, your 2025 swap roll-off is the loudest red flag, but the discussion omits how AGNC could mitigate via pre-hedge push or alternative instruments that may dilute margin drag. Even if the roll-off costs 50-150bps, management could offset through earnings accretion elsewhere, making the dividend sustainable in a soft landing if rates stabilize. The missing piece is stressed-scenario, not a single cliff-edge.
The panel consensus is bearish on AGNC, ARCC, and WES due to high risk premia, sensitivity to interest rate volatility, and potential dividend sustainability issues. AGNC's 2025 swap roll-off is the most pressing concern.
None identified by the panel.
AGNC's $8.2B notional swap book rolling off in 2025, potentially spiking effective duration and cratering net interest margin.