For over a century, Wall Street has stood as a beacon for wealth creation. Investors exploring ways to grow their wealth in the stock market frequently find that buying and holding high-quality dividend stocks consistently yields significant rewards over time.

Dividend-paying companies possess several key attributes:

• They are generally well-established and have shown resilience through various economic conditions.
• They generate consistent profits, which support regular dividend distributions.
• They can provide clear long-term growth prospects.

One of the defining characteristics of top-tier income stocks is their long-term outperformance. According to research presented in The Power of Dividends: Past, Present, and Future by Hartford Funds and Ned Davis Research, from 1973 to 2023, dividend stocks dramatically outperformed non-payers, delivering annualized returns of 9.17% versus 4.27%.

For investors seeking quicker returns, numerous stocks offer monthly dividends. Notably, a select few high-yield dividend stocks yield an average of 10.25%, allowing for potential monthly dividend income of $300 from an investment of $35,125, spread equally among three stocks.

AGNC Investment: 13.99% Yield

Leading the way is the mortgage real estate investment trust (REIT), AGNC Investment (NASDAQ: AGNC), known for its impressive 14% dividend yield. This figure reflects consistent double-digit yields over 14 of the last 15 years.

Mortgage REITs like AGNC often face scrutiny from analysts due to their sensitivity to interest rate fluctuations, especially in periods of rising rates, such as from March 2022 to July 2023. The recent inversion of the Treasury yield curve has added to their challenges.

Nonetheless, the prospects for AGNC Investment appear to be improving. With inflation dropping from its 9.1% peak and the Federal Reserve shifting towards a rate-easing policy, mortgage REITs have historically benefitted during such cycles. Lower short-term borrowing costs enhance their net interest margins.

Moreover, transparency in Fed policies gives AGNC an advantage in adjusting its asset portfolio to optimize returns. The company’s emphasis on agency assets—those backed by the federal government—provides a buffer against defaults, which stabilizes its yield from mortgage-backed securities (MBS).

If the Federal Reserve maintains its predictable stance and the yield curve steepens, both AGNC’s book value and net interest margin could see improvements.

Image source: Getty Images.

Realty Income: 5.7% Yield

Another strong contender is Realty Income (NYSE: O), a leading retail REIT that has successfully increased its dividend for 110 consecutive quarters. This company’s strength lies in its robust commercial real estate (CRE) portfolio, which includes over 15,600 properties, with about 91% considered resilient to economic downturns and immune to e-commerce pressures.

Realty Income focuses on established, stand-alone businesses that consistently attract foot traffic, even in shaky economic times. Over 25% of its contractual rent originates from essential retailers such as convenience stores, grocery stores, and dollar stores.

The company’s management also plays a crucial role, ensuring thorough vetting of tenants and securing long-term leases. With historically low rental delinquencies and an occupancy rate of 98.2%, significantly higher than the median rate for S&P 500 REITs, Realty Income stands out in its sector.

As part of its growth strategy, Realty Income is diversifying into new areas, including the gaming industry and data center investments, to capitalize on trends like the rise of artificial intelligence. Additionally, it’s trading at historically low values in relation to its future cash flows.

PennantPark Floating Rate Capital: 11.06% Yield

The third option for investors is PennantPark Floating Rate Capital (NYSE: PFLT), a lesser-known business development company (BDC). It currently yields over 11%, making it another solid choice for generating safe monthly dividend income with a divided investment of $35,125.

BDCs such as PennantPark typically invest in the equity and/or debt of middle-market companies, often small and emerging businesses. While PennantPark retains nearly $227 million in equity investments, its focus remains heavily on its $1.96 billion debt portfolio.