Harvest These 8-9% Yields For Recurring Income

Core Viewpoint - The article highlights two high-income stocks, Capital Southwest and Ladder Capital, which offer attractive dividend yields of 9.1% and 7.7% respectively, making them appealing options for dividend investors [1][12]. Group 1: Capital Southwest (CSWC) - CSWC is a well-managed business development company (BDC) with a conservative investment portfolio and a low operating expense ratio of 1.8%, the second-lowest in the BDC sector [2][3]. - The company has raised its dividend 29 times since 2015, with a cumulative dividend of $16.79 nearly equal to its NAV per share of $17.68 [3][4]. - CSWC's portfolio consists of 89% first lien debt and 9.1% equity exposure across 69 portfolio companies, focusing on defensive sectors like healthcare and food [4]. - The company generated a weighted average yield of 13.5% on income-producing investments and saw $108 million in new commitments during fiscal Q1 2025 [4]. - CSWC maintains a low debt-to-equity ratio of 0.75x, allowing for potential portfolio growth, and has a 122% NII-to-Dividend coverage ratio [4][12]. - The current price of $25.36 reflects a Price-to-NAV of 1.53x, but the forward PE of 9.8x suggests it is not overpriced given its earnings power [4]. Group 2: Ladder Capital (LADR) - LADR is an internally managed commercial mortgage REIT with a portfolio size of $5.2 billion, of which $2.5 billion is allocated to commercial loans [5][6]. - The loan portfolio has a 64% weighted average loan-to-value ratio, with 99% of loans being senior secured first mortgages, providing a buffer against potential losses [5][6]. - LADR's office loans constitute only 17% of the total portfolio, with a focus on Class A properties and loans originated post-COVID [6][7]. - The company reported a 10.5% return on adjusted equity during Q2 2024, with distributable EPS of $0.31 covering the $0.23 quarterly dividend at a 135% coverage ratio [8][10]. - LADR's adjusted debt-to-equity ratio improved to 1.4x, reflecting a strong balance sheet with higher liquidity and lower leverage [10][11]. - The current price of $11.89 represents a 13% discount to the undepreciated book value of $13.71, making it an attractive investment opportunity [11][12].