Looking For Passive Income? These Dividend Stocks Yield Up To 13.4% — And Wall Street Sees Major Upside In Them

The timeless adage “buy low, sell high” has attracted countless people to participate in the stock market. But as many discover the hard way, the strategy is easier said than done.

Stocks don’t always go up. Even though the S&P 500 is up 7% in 2023, it’s still down compared to where it was a year ago.

The good news? You don’t have to actively trade stocks to make money. You can also collect dividends.

By doing so, investors can bypass the stress and uncertainty associated with attempting to time the market while benefiting from a steady stream of passive income.

After all, even business magnate John D. Rockefeller once said, “Do you know the only thing that gives me pleasure? It's to see my dividends coming in.”

But most companies don’t pay much these days. The average dividend yield of S&P 500 companies is just 1.7% at the moment.

But some companies pay much more. Here’s a look at three that yield up to 13.4%. Wall Street also sees upside in this trio.

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FirstEnergy Corp. FE

FirstEnergy is an electric utility headquartered in Akron, Ohio. It has 10 electric distribution companies serving customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York.

Utility companies have long been a staple for dividend investors because of their reliability. Come what may, people will need to turn their lights on at night.

FirstEnergy pays quarterly dividends of 39 cents per share, translating to an annual yield of 4% at the current share price.

In the first quarter, the company earned a net income of $292 million, or 51 cents per share. In its earnings release, FirstEnergy affirmed its long-term target of annual operating earnings per share growth rate of 6% to 8%.

Shares are down 7% year to date, but Morgan Stanley analyst Stephen Byrd sees a rebound on the horizon. Byrd has an Overweight rating on FirstEnergy and a price target of $48, implying a potential upside of 23%.

Pioneer Natural Resources Co. PXD

Independent oil and gas exploration company Pioneer Natural Resources has been generous when it comes to returning cash to investors.

Last month, the company declared a quarterly cash dividend of $3.34 per share, consisting of a base dividend of $1.25 per share and a variable dividend of $2.09 per share. On an annualized basis, the recently declared dividend gives Pioneer a yield of 6.3%.

Because of the variable component, Pioneer’s payout may fluctuate significantly from one quarter to another. But the company also returns cash to investors through share repurchases.

In the first quarter, Pioneer bought back 2.4 million shares for $500 million. The company also refreshed its share repurchase program with a new $4 billion authorization.

Stifel analyst Derrick Whitfield has a Buy rating on Pioneer and a price target of $290. Considering that Pioneer currently trades at $210 per share, the price target suggests a potential upside of 38%.

Annaly Capital Management Inc. NLY

Annaly Capital Management is a diversified capital manager structured as a real estate investment trust (REIT).

The company’s investment strategies include agency mortgage-backed securities, mortgage servicing rights and residential real estate.

For the first quarter, Annaly paid a quarterly cash dividend of 65 cents per share. That comes out to an annual yield of 13.4%.

The cash dividend was lower than before, but in the first quarter, the company generated earnings available for distribution of 81 cents per share, which was more than its payout for the quarter.

In the latest earnings conference call, CEO David Finkelstein said, “We continue to maintain our defensive posture with economic leverage roughly unchanged on the quarter at 6.4 turns while outearning our rightsized dividend by $0.16.”

J.P. Morgan analyst Richard Shane has an Overweight rating on Annaly and a price target of $22 — roughly 15% above the current levels.

For investors who want to collect passive income from real estate but don’t want the volatility associated with publicly traded REITs, there are crowdfunding platforms that allow retail investors to invest directly in real estate with as little as $100 through the private market.

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