3 High-Yield Dividend Stocks That Can Bring You Bundles of Cash

Based on prices and dividends at the time of writing, the average dividend yield of stocks in Vitesse Energy (VTS -0.20%)THE JPMorgan Equity Premium Income ETF (JEEP 0.41%)and WHIRLWIND (WHR -1.53%) is 7.8%. All three are attractive, but all contain risks. Before adding these three stocks to a high-yield portfolio, here’s what you need to know.

Vitesse Energy (9.1% dividend yield)

Vitesse is an oil and gas exploration and production company with a difference. Instead of owning and operating assets, it focuses on investing in minority working interests in assets produced by other leading companies. In addition, management follows a discretionary strategy of hedging a portion of its oil production to protect against the risk of falling oil prices.

It’s an attractive model because it focuses the company’s value-creating activity on what management does best — acquiring productive interests in oil wells and then generating cash flows from oil and gas production.

That said, it makes sense to look at the risks. First, as mentioned, the hedging strategy is discretionary, so you always rely to some extent on management’s ability to hedge appropriately. Second, a significant drop in oil prices will further affect Vitesse Energy as it will make oil production less profitable for oil producers. Third, management may not be able to identify value-enhancing acquisitions.

Overall, Vitesse is attractive to investors who are bullish on oil and those who are happy with the price around the current value. Additionally, if you are confident in the management team led by industry veteran Bob Gerrity, then Vitesse is an excellent stock to add to a diversified income-generating portfolio.

JPMorgan Equity Premium Income ETF (6.8% dividend yield)

The first key point to understand about this ETF is that it invests at least 80% of its assets in actively managed US stocks – meaning it gives investors exposure to the US stock market and the dividend yields generated by the stocks it owns.

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Second, it invests up to 20% of its assets in buying equity-linked notes (ELNs) that sell out-of-the-money call options on S&P 500which is a hedge against volatility and significant stock declines. It’s worth noting that it allows the ETF to receive a premium when the S&P 500’s performance is negative in the month or rises moderately, but the ETF will lose money on ELNs in a strongly positive month for the S&P 500.

In short, you can expect the ETF to be positive but underperform the market in bullish markets (but still provide good returns) because the increase in share value will be offset by losses in the ELN strategy. However, the ETF’s downside is protected when equity markets fall due to the ELN strategy.

The fund’s sweet spot is a moderately rising equity market environment, allowing for dividend income, ELN strategy premiums and equity capital appreciation.

This is confirmed by his history.

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Overall, it’s a good option for investors looking for monthly income and those concerned about downside risk in the stock market.

Whirlpool (7.5% dividend yield)

This company faces significant short-term risks, but has plenty of long-term opportunities. Persistence of relatively high interest rates and a concomitant slowdown in existing home sales are having a negative impact on consumer discretionary purchases of major appliances (MDAs).

This hampers MDA sales in North America and squeezes profit margins, as discretionary purchases can be higher-margin (think planned kitchens) compared to lower-margin replacement demand for items like refrigerators and cars to wash. As such, management lowered its full-year margin, earnings and cash flow guidance on its last earnings call.

If Whirpool’s bottom-line market conditions deteriorate further, its dividend could be hit, or at the very least, its plans to reduce its $6.3 billion in long-term debt be pushed back.

On the other hand, management believes that spring price increases helped MDA’s North American segment profit margins improve to 6.3% in the second quarter, compared to 5.6% in the first quarter. Furthermore, management expects North American MDA to end the year with margins of 9%.

Additionally, the other three segments (accounting for 38% of segment profit in the second quarter) all increased year-over-year earnings in the second quarter.

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The rise in stocks comes on the back of a potentially better interest rate environment and a recovery in the housing market, though it may not start until 2025 at the earliest. Until then, Whirlpool will have to screw around. It could get worse before it gets better, but the stock looks like a good value at a price-to-earnings ratio of less than 10.