### Investing in High-Yield Dividend Stocks: A Promising Avenue for Income Seekers

In the complex world of Wall Street, dividend-paying stocks are hailed as a reliable investment choice. Unlike non-dividend stocks, these companies must already be profitable and likely to remain so, having committed to returning a portion of their profits to shareholders. A comparison over fifty years, from 1973 to 2023, reveals that non-dividend-paying stocks in the S&P 500 index delivered an average annual return of 4.27%, whereas their dividend-paying counterparts doubled this performance with an average annual return of 9.17%.

Among the dividend-paying options, three stocks stand out with yields of 9.1% and higher: Ares Capital (NASDAQ: ARCC), PennantPark Floating Rate Capital (NYSE: PFLT), and Rithm Capital (NYSE: RITM). These stocks not only offer high yields but also have a solid financial base that belies investor concerns about their fundamentals.

Ares Capital, the largest publicly traded business development company in the world, fills the financing gap left by major banks. This BDC has the advantage of legally avoiding income tax by distributing at least 90% of its earnings as dividends. As of recent prices, Ares Capital provides investors with a 9.1% yield. Its portfolio is highly diversified, with investments worth $25.9 billion across 535 borrowers, minimizing risks through diversification. At the end of September, only 1.3% of its loans were on non-accrual status, ensuring consistent returns for investors. Over the past decade, Ares Capital has raised its dividend by 26%, proving its stability and cautious cash flow management.

PennantPark Floating Rate Capital, another BDC, targets mid-sized companies that banks often overlook. This company benefits from issuing loans with variable interest rates, making it less sensitive to rate changes. By the end of June, the average yield on its debt investments was a healthy 12.1%. Even as the Federal Reserve began lowering interest rates in September, which may affect yields, PennantPark's ability to reduce its cost of capital will likely cushion any financial impact. At current prices, PennantPark Floating Rate offers an impressive 11% dividend yield with convenient monthly payments. Despite some fluctuations, the company has maintained or raised its payouts since 2015.

Rithm Capital, a real estate investment trust (REIT), diversifies its focus across mortgage origination and servicing, mortgage-backed securities, and single-family rentals. This approach has proven successful, particularly after the company quickly recovered from a dividend cut in early 2020. Currently, Rithm Capital offers a robust 9.5% yield, backed by their rising earnings. In the third quarter, their earnings available for distribution jumped to $0.54 per share from $0.47 per share in the previous quarter. This substantial earning ensures the company's ability to sustain and potentially increase its dividend, which is currently set at $0.25 per share. Rithm's book value was estimated at $6.4 billion at the end of September, while its recent market cap hovered around $5.5 billion, presenting an attractive valuation for income-seeking investors.

In summary, Ares Capital, PennantPark Floating Rate Capital, and Rithm Capital present compelling investment opportunities with high yields and strong fundamentals, offering a blend of stability and attractive returns for savvy investors.