UltraHighYield

Don’t just look at share price appreciation. Why? It doesn’t tell the whole story. Thousands of stocks pay dividends. And those dividends often significantly boost the stocks’ total returns.

You can especially make a lot of money when you invest in stocks with juicy dividend yields in addition to tremendous share price growth potential. Here are two ultra-high-yield dividend stocks with a total return potential of up to 41% over the next 12 months, according to select Wall Street analysts.

Kenvue

Kenvue (KVUE 1.98%) ranks as the largest pure-play consumer health company in the world. Johnson & Johnson (JNJ 0.31%) spun off Kenvue as a separate entity in 2023. The new business inherited an impressive lineup of products, including Band-Aid bandages, Listerine mouthwash, Neutrogena skin care products, and over-the-counter pain relievers Motrin and Tylenol .

In addition, Kenvue inherited J&J’s status as a Dividend King. The consumer health company has continued to increase its dividend since the spin-off two years ago. It now boasts an impressive streak of 63 consecutive annual dividend hikes. Kenvue’s forward dividend yield also tops 5.1%.

However, one reason why Kenvue’s yield is so high is that its stock has performed dismally. Revenue growth has been weak. Profits have declined sharply since the company became a stand-alone entity.

More recently, Kenvue announced a shake-up at the top in July with Kirk Perry stepping in as interim CEO while Thibaut Mongon was shown the door. The company also underwent a public relations crisis after President Donald Trump and Secretary of Health and Human Services Robert F. Kennedy Jr. claimed that the use of Tylenol during pregnancy could be linked with autism in children.

Kenvue responded quickly to refute those claims adamantly. So did several healthcare organizations, including the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, the Autism Science Foundation, and the Society for Maternal-Fetal Medicine.

Several Wall Street analysts think that the worst could be over for Kenvue. For example, Bank of America (BAC 5.11%) and JPMorgan Chase (JPM 2.80%) have price targets for the stock that reflect an upside potential of roughly 29%. If they’re right and Kenvue continues to pay dividends at least at the current level, investors could enjoy a total return of more than 34% over the next 12 months.

United Parcel Service

United Parcel Service (UPS 0.10%) is the world’s largest package delivery company. It operates in more than 200 countries and territories. UPS delivers roughly 22.4 million packages every business day.

Image source: United Parcel Service.

Although UPS isn’t a Dividend King like Kenvue, it has a pretty good dividend pedigree. The company has increased its dividend for 16 consecutive years. It has never cut the dividend since going public in 1999. UPS’ forward dividend yield is a mouthwatering 7.9%.

The bad news is that UPS’ tremendous yield is due largely to its atrocious stock performance over the last few years. Plenty of factors contributed to this decline, including higher costs resulting from a contract with the Teamsters union and lower shipment volumes following the COVID-19 pandemic.

Management’s decision to significantly reduce the shipments handled for Amazon (AMZN 0.05%) is causing revenue to decline. The Trump administration’s tariffs are especially hurting UPS’ business in its most profitable lane between China and the U.S.

However, some analysts on Wall Street are nonetheless upbeat about UPS’ prospects. As a case in point, Citigroup‘s (C 0.66%) latest 12-month price target is around 35% higher than UPS’ current share price. With such an ambitious target and the package delivery giant’s hefty dividend yield, UPS stock could deliver a total return in the ballpark of 42%.

Are these analysts right about Kenvue and UPS?

I’m iffy about whether or not Kenvue and UPS can deliver the lofty total returns over the next 12 months that some analysts predict. However, I think both stocks could be winners for investors over the long run. Kenvue and UPS could also be solid picks for investors seeking income.

There’s one very big reason some income-focused investors might want to buy mortgage real estate investment trust (mREIT) AGNC Investment (AGNC 0.79%). That would be its astonishingly high 14% dividend yield. But a yield that high is highly unusual, given that the S&P 500 index (^GSPC -0.10%) yields only 1.2%, and the average REIT yields only 3.8%. If you’re looking for an investment that will set you up for a lifetime of reliable dividends, you’ll need to tread with caution here.

AGNC Investment is a decent mREIT

A double-digit dividend yield isn’t particularly abnormal in the mortgage niche of the broader REIT sector. For the most part, AGNC Investment is a fairly well-run mREIT. Notably, the stock’s total return since its initial public offering (IPO) is very compelling, as the chart below highlights. In fact, the total return is very close to that of the S&P 500 index. However, the return doesn’t track along with the S&P 500, so AGNC Investment looks like an attractive diversification tool.

AGNC Total Return Price data by YCharts.

If you’re looking for a total return type of investment, however, AGNC Investment could be attractive for your portfolio. There’s just one small problem. Total return requires the reinvestment of dividends. That makes sense, given the nature of the mortgage-backed securities that AGNC Investment buys.

When you make a mortgage payment, part of the payment goes to the principal and part goes to the interest. That doesn’t change just because AGNC Investment owns mortgages that have been pooled into bond-like securities. Thus, every time AGNC Investment collects a payment on a security it owns, part is interest and part is principal. The huge dividends the mREIT pays are, similarly, made up partly of interest and partly of principal. That principal is effectively a return of investor capital.

Image source: Getty Images.

AGNC Investment’s big dividend problem

The issue for dividend investors is that AGNC Investment’s dividend hasn’t been stable over time. In the table below, the blue line is dividends, and it has been highly volatile. After the IPO, the dividend rose sharply. Then it started to fall, and it’s been heading lower for roughly a decade, as have the shares. Paying out principal, or returning capital to investors, means that the value of the portfolio inherently shrinks over time. That means that there’s less capital to earn interest.

AGNC data by YCharts.

If you spend the dividends AGNC Investment pays you, you are, effectively, spending some of your own capital. To be fair, AGNC Investment has paid out more in dividends than it has lost in value since its IPO. So dividend investors have made out OK with this arrangement. But you still can’t buy AGNC Investment and expect a reliable dividend to support your spending needs in retirement. That’s just not on the table here, and the company’s dividend history proves it. To be fair, the company itself highlights that its ultimate goal is total return, not dividend income.

AGNC is an acquired taste

AGNC Investment is not an easy REIT to wrap your head around. It’s not a bad investment, but it is highly complicated to understand. More specifically for dividend investors, the dividend is not, and probably never will be, reliable.

Most dividend investors are looking for a stock that pays a dividend that’s sustainable, if not growing, over time. If that’s what you want, this 14% yield is very likely to let you down, no matter how attractive it looks relative to other high-yield dividend stock options you have.