Aren’t you afraid to take some risks? These high-yield stocks can turn $10,000 into nearly $1,275 in annual income

There is an old investment saying that the greater the risk, the greater the potential for return. Although this is not always true, in many cases, investors need to take on more risk to get a higher return. It is their reward for investing money at the risk of loss.

While all investments involve some form of risk, many investors (especially those seeking to generate income) prefer to limit their risks. However, there are some interesting income opportunities for those who are willing to take more risks. For example, those who have $10,000 and want to invest it in higher-risk, higher-upside opportunities can turn that capital into a supercharged income stream by investing it in three dividend stocks with great returns:

Data source: Google Finance and author’s calculations.

Here’s a closer look at why these payouts are so high and whether these companies are able to sustain their big payouts.

Development of high-yield real estate investment trusts

Rhythm Capital is a unique company Mortgage real estate investment trust (REIT). I started by focusing on investing in mortgage servicing rights. However, it has since expanded its platform, evolving into an asset manager. Last year, it took a notable step in its turnaround, acquiring Sculptor Capital Management in a deal that significantly expanded its asset management capabilities.

The company believes it Shift towards asset management It will put it in a better position to maintain its profit base and grow its business. A stable and growing earnings base will enhance its ability to pay dividends.

However, with Rithm Capital becoming merely an asset manager, The company risks outgrowing its REIT structure. If this happens, the company may need to become a taxable corporation. This switch may also reset its dividend since it will not need to meet the high return requirements of being a REIT. This would enable Rithm to hold more cash to fund its growth ambitions. The risk of potential earnings resets is a factor that income-focused investors should consider.

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Unhealthy tenants

Medicinal Properties Fund is a Healthcare real estate investment trust Focused on owning hospitals. The company has been under tremendous pressure over the past two years due to tenant issues and rising interest rates. These headwinds have already prompted the real estate investment trust to cut its dividend by nearly half last year.

The hospital landlord works directly with tenants to provide assistance in the form of rent deferrals and loans. She hopes these moves will enable tenants to get through their rough patches so they can resume paying rent. However, the company seems to be taking one step forward and two steps back, as tenant issues are not It improves as quickly as expected.

In addition to its tenant woes, Medical Properties Trust is facing rising interest rates. They make refinancing outstanding debt more difficult. This led to the REIT selling properties to pay off debts. While it has the funds to pay off its dues in 2024, more debt will come due over the next few years. If the REIT’s interest rates and tenant issues don’t improve, it may need to cut its dividend again to hold more cash to pay down debt and rebuild its portfolio.

Low energy operation

NextEra Energy Partners also faced severe headwinds from rising interest rates. They made it more difficult for me Renewable energy The producer has access to the lowest-cost capital it needs to recover outstanding financing and finance new acquisitions.

The company’s problems have forced it to shift gears. It revealed a plan to sell natural gas pipeline assets to help finance repayment of outstanding financing. It completed one sale late last year and plans to put its remaining gas pipeline assets up for sale in 2025.

Additionally, NextEra Energy Partners slowed its growth target. It cut its earnings growth forecast from 12% to 15% annually through 2026 to 5% to 8%, with a target of 6%. The company has also shifted its main growth driver from acquisitions to repowering existing wind farms.

One concern about a company’s strategy is that it predicts its success Profit distribution percentage To be in the mid-1990s until 2026. This very high level does not leave much room for error. If the company has trouble selling its remaining gas pipelines or a power restoration plan, it may need to cut its dividend to help strengthen its balance sheet or fund its growth.

High-risk, high-reward stocks

Rithm Capital, Medical Properties Trust, and NextEra Energy Partners offer investors great returns. Unfortunately, they also come with high-risk profiles. Because of that, it’s not for everyone. However, for those with a high risk tolerance, they can provide a high-octane income stream and high potential if they can execute their strategies while maintaining their payouts.

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DiLallo died He has positions in Medical Properties Trust and NextEra Energy Partners. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has Disclosure policy.

Aren’t you afraid to take some risks? These high-yield stocks can turn $10,000 into nearly $1,275 in annual income Originally published by The Motley Fool