I like every part of the phrase "ultra-high-yield dividend stocks." Investing in stocks allows me to own portions of great businesses. Dividends pay me to own the stocks. And thinking about dividends with ultra-high yields brings a smile to my face.
The new year presents a great opportunity for investors who share my appreciation for these kinds of stocks. Here are my five favorite ultra-high-yield dividend stocks to buy for 2025 (listed alphabetically).
1. Ares Capital
Ares Capital (ARCC 0.36%) checks off multiple boxes for me. Its forward dividend yield of 8.72% is especially attractive. I view Ares Capital's valuation as attractive with shares trading at only 10 times forward earnings. I also like that the stock has trounced the S&P 500 index over the long term based on total returns.
But what I love the most about Ares Capital is that it appears to be in a strong position to keep up its winning ways and continue paying those juicy dividends. Ares Capital ranks as the largest publicly traded business development company (BDC). The market for BDCs -- and especially Ares -- is growing with increased demand for borrowing among middle-market companies and a sustained shift to private capital.
2. Enbridge
Enbridge (ENB 0.05%) pays a forward dividend yield of 6.44%. Even better, the company has increased its dividend for an impressive 30 consecutive years. I expect that streak to continue, with Enbridge projecting that its distributable cash flow will increase by a compound annual growth rate of around 3% through 2026 and by around 5% in subsequent years.
The company remains one of the top players in the midstream energy industry with pipelines across the U.S. and Canada. However, Enbridge is also now the largest natural gas utility in North America thanks to recent acquisitions. The markets it serves have growing populations and significant opportunities for supplying power to data centers.
3. Enterprise Products Partners
Another midstream leader, Enterprise Products Partners (EPD -0.23%), offers an even higher forward yield of 6.76%. The company's track record isn't far behind Enbridge's, either, with 26 consecutive years of distribution increases.
I suspect 2025 will be a great year for midstream energy stocks with the incoming Trump administration's pledge to "drill, baby, drill." Even if not, though, Enterprise Products Partners should generate solid cash flow to fund its distribution. The company has an exceptional history of durable cash flow during both good and bad conditions for the energy sector.
4. Honda Motor
Honda Motor (HMC 1.38%) didn't provide positive returns in 2024. However, the industrial giant pays a rich dividend yielding 4.94%. It also rewarded shareholders through stock buybacks. And with a forward earnings multiple of only 6.75, Honda is cheap in a market that's chock-full of stocks priced at a steep premium.
The company's business continues to perform pretty well overall, with solid year-over-year sales growth for its motorcycle, automobile, and financial services units. Honda is poised to be even more competitive against Toyota and Chinese automakers with its pending acquisition of Nissan. This deal could especially help Honda compete more effectively in the electric vehicle market. If the transaction doesn't hit any roadblocks, the merger of Honda and Nissan would create the world's third-largest automaker.
5. Pfizer
Pfizer (PFE 0.23%) is another poor performer in 2024 that I think could become a solid winner going forward. In the meantime, the big drugmaker offers an attractive forward dividend yield of 6.46%. Pfizer's management consistently ranks maintaining and growing the dividend as its top capital allocation priority -- something income investors especially like to hear.
I'm fully aware of Pfizer's challenges, notably including a steep drop in COVID-19 product sales and a looming patent cliff. However, I view this pharma stock as a diamond in the rough. Pfizer has multiple newer products that should drive growth over the next few years. It's also a bargain, with shares trading below 9 times forward earnings and a super-low price-to-earnings-to-growth (PEG) ratio based on five-year growth projections of 0.2, according to LSEG.
