Consistent, high-yield stocks are among my favorite investments. Their reliable payouts act like an ATM while helping shield my portfolio from a downturn. Over two decades of investing through ups and downs, I’ve found that quality stocks with above-average dividends are ideal for building wealth over time, especially if you’re reinvesting those dividends. 

However, I can’t stress enough how important it is to do your due diligence before entering this market. Yields—the most common way to gauge a dividend stock’s attractiveness—don’t paint the whole picture. One recent example is a lesson that became painfully clear to Leggett & Platt (NYSE:LEG) dividend growth investors.

To identify high-yielding stocks with a strong potential for growth while offering the best capital appreciation advantage, I screened the market using the following criteria:

• Analyst coverage: minimum of six analysts covering the stock,
• Analyst rating: Strong buy only,
• Dividend yield: 10% and above. 

Then, I arranged the stocks from highest to lowest dividend yields, and here are the top three results:

Trinity Capital (TRIN)

Trinity Capital Inc. (NASDAQ:TRIN) is an internally managed, non-diversified business development company. The firm provides debt financing solutions, such as loans and equipment financings, to growth-stage companies backed by venture capital or institutional equity investors. 

Trinity Capital’s recent Q1 2024 financials reported mixed YOY movements across major metrics. The company’s total investment income jumped 21.5% to $50.5 million, while its net income climbed to $25.16 million from $19.33 million YOY. Not all was rosy, though, as the value of non-controlling investments took a not-so-cool $14.22 million hit. Still, the quarterly EPS held steady at $0.54—nearly matching last year’s.

The company’s annual dividend payout is $2.04 per share, translating to an attractive 14.57% yield. If a near 15% yield makes you nervous, consider that eight Wall Street analysts gave Trinity Capital a thumbs-up with a strong buy rating, making it one of the best high-yield stocks in the market today. That’s no small potatoes in today’s market.

Ellington Financial (EFC)

REITs offer investors a unique opportunity to diversify their portfolios with exposure to real estate assets. Ellington Financial (NYSE:EFC) is a prime example, operating in two segments: Investment Portfolio and Longbridge.

• The Investment Portfolio Segment consists of mortgage loans, RMBS, CMBS, consumer loans, ABS, CLOs, derivatives and strategic investments.
• Longbridge Segment: origination and servicing of reverse mortgage loans.

Based on Ellington Financials’ recent Q1 2024 report, the financial services company seems to be sailing through rough waters. Although its interest income significantly increased to $101.52 million from $87.17 million YOY, its net income dropped to $34.05 million from $44.75 million, with quarterly EPS settling at $0.32.

Despite facing headwinds, though, Ellington Financials showed resilience in certain areas. The company maintained a sound liquidity position with $187.5 million in cash and cash equivalents alongside $544.5 million in unencumbered assets.

In addition, its forward annual dividend payout is $1.60 per share, which translates to a decent yearly yield of 12.8%, giving other high-yield stocks a run for their money. Meanwhile, Wall Street appears optimistic about Ellington’s prospects, with seven analysts giving EFC stock a consensus strong buy rating. 

Blackstone Secured Lending (BXSL)

Blackstone Secured Lending (NYSE:BXSL) is a business development company primarily investing in first-lien senior secured debts. These debts are secured as they are backed by collateral, protecting the company’s business and making it highly profitable. 

Blackstone’s Q1 2024 results saw a marginal increase in net investment income, from $149 million to $166 million, while net income per share saw a similar increase from 86 cents to 96 cents. The company also pays 77 cents per share quarterly, which equals $3.08 annually. This translates to a 10.45% yield. 

“Our portfolio remains defensive with 98.5% first lien, senior secured debt with less than 50% LTV, and minimal non-accruals at just 0.1% at cost,” said co-CEOs Brad Marshall and Jonathan Bock in the company’s most recent filing. “We see strength in deployment activity, and with a growing pipeline, BXSL investment commitments increased in the first quarter of 2024 to the highest level since 2021.”

Analysts seem to be quite happy with BXSL’s performance, with ten rating the stock as a strong buy on average. Investors looking for high-yield stocks might want to watch BXSL or, better yet, start accumulating shares before its next payout. 

On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.