A high dividend yield is typically the result of either a high dividend or a low share price. The latter is quite common in a slowing economy where sales and profits are beginning to fall. As the share price drops, the yield will go up, though not necessarily for the right reasons.
Several companies have offered high yields only to cut or eliminate the dividend later. That’s been the case in the telecom space in the past. More recently, we’ve seen it with banks and oil companies. Shell’s dividend cut in 2020 was a real shock to dividend investors, as it had so long been regarded as one of the bedrock companies of the dividend universe. Conagra Brands also cut its dividend by 50% in July 2026 as its business was under pressure. The move was driven by shrinking margins and the need to free up cash for debt reduction and a turnaround. It wasn’t so much a case of being unable to pay the dividend at that point in time as it was a decision to strengthen he company’s balance sheet over the longer term. Even companies with long records of dividend growth have faced such setbacks. Explore 10 Dividend Aristocrats That Slashed Their Dividends to see examples of established dividend payers that have cut their payouts in the past.
Still, not every high yield is a trap. At times, markets can become excessively bearish on companies with solid fundamentals and sustainable cash flows. This can present opportunities to buy the shares at a discount to their intrinsic value. The issue is to work out which are the genuinely undervalued businesses and which are simply companies whose high yields are a reflection of underlying weakness.
Also read: Dividend Aristocrats Ranked By Yield: Top 10 Stocks
We saw this opportunity in British American Tobacco in June 2024. The stock had lost about 40% over the period as a result of the non-cash impairment charges. However, we thought that the underlying business was sound. The impairment charges that BTI had reported were charges against the acquired brands rather than equivalent cash outflows. The market treated the company as a melting ice cube and pushed its forward P/E multiple to 7.
So, we decided to add the stock to our Premium Readership Newsletter’s portfolio. At the time BTI had a dividend yield of around 10%. Over the next 16 months, the share price nearly doubled, and our subscribers also received a 10% dividend income. Read BTI’s full analysis here: British American Tobacco Pays a 6% Dividend. Can its Business Sustain it?
Our own experience is that high-yield dividend stocks are worth looking at. An investor who can pick out the genuinely undervalued business from the ones with unsustainable payouts can achieve both good dividend income and good capital gains. Of course, that’s not assured in any way, and careful analysis of cash flow, debt, and dividend sustainability remains essential.
Our Methodology:
For this list, we screened dividend-paying companies with market capitalizations of at least $500 million and ranked their appeal based on dividend yields. From an initial group of 30 stocks, we selected the 10 companies held by the largest number of hedge funds, according to Insider Monkey’s Q2 2026 database. These stocks offer dividend yields ranging from over 15% to as high as 33%. The stocks are ranked according to the number of their hedge fund investors.
10. Prospect Capital Corporation (NASDAQ:PSEC)
Number of Hedge Fund Holders: 13
Dividend Yield as of October 23: 28.38%
Prospect Capital Corporation (NASDAQ:PSEC) is a business development company (BDC) that makes loans to privately held mid-sized U.S. businesses. The majority of its income is derived from interest on the loans it makes and from returns on its other investments.
PSEC is offering a fantastic dividend yield of 28.3%, mainly because the share price has dropped dramatically in relation to the monthly dividend payments. The company declared monthly dividends of $0.035 per share for both September and October 2026. That’s $0.42 per share annually if that continues. At the current share price, that works out as a very high yield. The market is clearly pricing in a lot of concern about the company’s earnings, its investment portfolio, and its ability to continue paying the dividend.
At the end of Q2 2026, 13 hedge funds held PSEC, which suggests that some of the institutional investors see some potential in the stock. They may be looking for a rebound in the share price, drawn in by the income potential or expecting some improvement in the portfolio. Prospect has also increased its focus on first-lien secured loans, which give the lender a first charge on the borrower’s assets in the event of default. First lien secured loans made up 72.5% of their middle market portfolio by cost as at June 2026.
There are still real risks. PSEC reported net investment income of $0.15 per share in the June quarter, covering the $0.115 distribution. Net income attributable to common shareholders was negative $0.08 per share. Hedge fund ownership doesn’t necessarily equate to future returns either, as the funds in question may have very different strategies and time horizons.
Take a look at this analysis: Prospect Capital’s (PSEC) Payout Shrinks Even As Its Deals Pay Off
9. ARMOUR Residential REIT, Inc. (NYSE:ARR)
Number of Hedge Fund Holders: 15
Dividend Yield as of October 23: 22.36%
ARMOUR Residential REIT, Inc. (NYSE:ARR) invests primarily in mortgage-backed securities issued or guaranteed by U.S. Government-sponsored entities. It earns income from the interest on those securities and uses leverage to enhance its returns.
ARR’s 22.3% dividend yield is a direct result of the size of the monthly payouts and the low valuation of the shares. They pay $0.24 per share per month, which is $2.88 per year at the current rate. Debt can amplify returns, but it also carries risks: the cost of debt can rise, interest rates can change, and mortgage security prices can fall, all of which can negatively impact profits. That’s probably the best explanation for the stock’s very high yield.
The company’s dividend policy is to review earnings, financial position, REIT tax requirements, and market conditions prior to declaring a dividend. As a REIT, ARR is generally required to distribute at least 90% of its taxable income each year. The dividend is not guaranteed, and the board can reduce it if circumstances so require. Realty Income, on the other hand, is going strong in its dividend game. Read here.
As per Insider Monkey, 15 hedge funds held ARR at the end of Q2 2026. They may be seeking monthly income, hoping to profit from interest rate changes, or betting on a higher valuation. Some of the funds may be employing more sophisticated strategies to hedge against market and interest rate risk. Hedge fund interest in the stock doesn’t in any way make it a safe investment, but does indicate that professional investors see some value in it.
8. Qfin Holdings, Inc. (NASDAQ:QFIN)
Number of Hedge Fund Holders: 17
Dividend Yield as of October 23: 23.57%
Qfin Holdings, Inc. (NASDAQ:QFIN) is a Chinese credit tech platform that connects consumers and SMES with financial institutions. The platform’s technology is used by lenders to evaluate borrowers, manage credit risk, and collect repayments.
The 23.57% dividend yield is a function of the stock’s low share price in relation to its annualized dividend, but don’t assume that the dividend will be paid out in perpetuity. QFIN has a semi-annual dividend policy. For the first half of 2026, the company declared $0.46 per ADS. It also has a share buyback program in place, though its cautious outlook suggests some pressure on earnings. Read the analysis here: A Profit Collapse Masks Qfin’s (QFIN) Bigger AI Ambitions
Insider Monkey’s Q2 2026 data shows 17 hedge funds have invested in the company. Some investors increased their exposure: Triata Capital upped its position by 48% to 5.17 million shares, Arrowstreet Capital by 337% to 1.90 million shares, and Citadel also increased its position significantly. There appears to be some investor interest in QFIN given the scale of the positions in the lending tech, the size of the customer base, and the amount of cash on the balance sheet. D. E. Shaw, by contrast, reduced its position by about 19% to 2.53 million shares, suggesting institutional sentiment is far from unanimous.
The risks are real. Q2 2026 revenue was down from the prior year, and net income was down to RMB401.4m from RMB1.73bn. The high yield is likely to be a reflection of concerns around the Chinese lending environment and the sustainability of future dividends.
7. MFA Financial, Inc. (NYSE:MFA)
Number of Hedge Fund Holders: 16
Dividend Yield as of October 23: 21.62%
MFA Financial, Inc. (NYSE:MFA) is a mortgage REIT that invests in residential mortgage loans and mortgage-backed securities and also originates loans for real estate investors via its subsidiary Lima One Capital. The business is reliant on the income generated from the assets, the cost of funding, interest rates, and the ability of the borrowers to service their loans.
The stock currently has a dividend yield of 21.6%, which reflects the market price relative to its annualized dividend of $1.44 per share. MFA has had a quarterly dividend of $0.36 in place since 2025. The dividend does need to be looked at, though, as the second quarter 2026 distributable earnings were only $0.12 per share, significantly below the dividend. Earnings before realized credit losses were $0.35 per share, which is just about sufficient to cover the dividend. That gap indicates the impact loan losses can have on dividend sustainability. Read what analysts think of the stock.
Hedge fund interest also reflects MFA’s portfolio repositioning. By June 2026, MFA’s residential investment portfolio had grown to $13 billion, including $5.7bn in non-qualified mortgage loans and $4.1bn in agency MBS. The 60-day delinquency rate has come in at 7.0% down from 7.8% in the prior quarter. That’s likely to be of interest to investors who are looking for a recovery in mortgage assets and earnings.
Insider Monkey’s most recent table shows AQR Capital Management, Renaissance Technologies, Ellington, Citadel, and Millennium as MFA’s hedge fund holders. Citadel has increased its position by 207%, while Ellington has reduced its position by 51%, so institutional interest appears split rather than broadly positive.
6. Orchid Island Capital, Inc. (NYSE:ORC)
Number of Hedge Fund Holders: 18
Dividend Yield as of October 23: 25.74%
Orchid Island Capital, Inc. (NYSE:ORC) is a mortgage REIT that invests in residential mortgage-backed securities issued by Fannie Mae and Freddie Mac. It borrows heavily to purchase the securities and makes its income from the spread between the mortgage yields and the cost of borrowing.
The stock’s current dividend yield of 25.7% reflects its $0.10 per share monthly dividend and the low share price. The company is leveraged to enhance returns, but its profits are very much subject to interest rates, mortgage spreads, and hedging costs. Q2 2026 saw ORC generate $0.30 per share in net interest income and pay out $0.30 per share in dividends. Book value also rose by $0.14 per share in the quarter. See how analysts view the company’s dividend polocy.
Insider Monkey’s Q2 2026 hedge fund data is the relevant ownership metric. Millennium Management, Citadel Investment Group, D. E. Shaw, and Arrowstreet Capital are some of the most prominent funds investing in the company. Their holdings could be attributable to quantitative strategies, trading opportunities, or their view on the state of the mortgage market rather than any confidence in the dividend. ORC intends to pay regular monthly cash dividends but has no guarantee of a minimum payout. The dividend was reduced from $0.12 to $0.10 in 2026, which is a clear example of the fact that dividends can be cut depending on the performance of the business and the state of the market. The high yield has to be balanced against the level of leverage, the interest rate risk, and the very real possibility of further dividend cuts.
5. Arbor Realty Trust, Inc. (NYSE:ABR)
Number of Hedge Fund Holders: 25
Dividend Yield as of October 23: 32.19%
Arbor Realty Trust, Inc. (NYSE:ABR) is a mortgage REIT that lends to owners of apartment buildings and other real estate properties. It also earns fees by servicing mortgages, including loans backed by Fannie Mae and Freddie Mac.
ABR has a dividend yield of over 32%, and its high dividend yield reflects serious concerns about its earnings and loan portfolio, not simply generous shareholder returns. In the second quarter of 2026, the company reported distributable earnings of just $0.10 per share, or $0.15 excluding certain realized losses, against a quarterly dividend of $0.17. It also recorded a $37.3 million GAAP net loss and $38.2 million in loan-loss provisions. These figures raise questions about how comfortably earnings can support the payout.
Arbor has also reduced its quarterly dividend from $0.30 in late 2025 to $0.17 in 2026. At the latest declared rate, annualized dividends equal $0.68 per share. The yield looks unusually high partly because the share price has fallen sharply.
Hedge funds still see potential in the stock. Insider Monkey lists Coatue Management, Marshall Wace, Omega Advisors, Scoggin and Citadel among its holders. In the latest data, Omega increased its position by 7% and Citadel by 11%. Investors may be betting on a recovery in real estate lending, improved financing costs, or a rebound in the depressed share price. These positions do not necessarily signal confidence in the dividend, though, and some funds may use hedging strategies. For ordinary investors, the key question is whether Arbor can recover enough earnings to cover its dividend. Its large mortgage-servicing business offers recurring fee income, but rising loan losses and weak distributable earnings make the payout risky.
See what other mortgage finance stocks billionaires are investing in: 10 Best Mortgage Finance Stocks To Buy According to Billionaires
4. Annaly Capital Management, Inc. (NYSE:NLY)
Number of Hedge Fund Holders: 26
Dividend Yield as of October 23: 15.80%
Annaly Capital Management, Inc. (NYSE:NLY) is a well-established mortgage REIT with a clear focus on mortgage-backed securities, residential loans, and mortgage servicing rights. The company’s strategy involves borrowing funds at relatively low rates and investing in higher-yielding mortgage assets, aiming to earn income from the spread between these rates. While the approach is straightforward, investors must understand the underlying risks.
The stock has a dividend yield of nearly 16%, driven by its leveraged business model, which relies on the spread between borrowing costs and investment returns. In the third quarter of 2026, Annaly reported an economic net interest spread of 1.42%, excluding premium amortization. This relatively narrow margin means that even modest changes in interest rates or borrowing costs can significantly impact profitability. Leverage can enhance returns, but it also increases exposure to market volatility. Read the analysis here.
Institutional interest in Annaly remains consistent. Insider Monkey data from the second quarter of 2026 indicates that 26 hedge funds held positions in the company, amounting to approximately $320 million. This ongoing support from professional investors reflects confidence in Annaly’s diversified mortgage portfolio and its ability to deliver income, particularly if market conditions become more favorable.
Annaly declared a dividend of $0.75 per share for the third quarter of 2026, which would total $3 per share annually if maintained. This payout was supported by earnings available for distribution of $0.80 per share, resulting in a coverage ratio of approximately 1.07 times. While this coverage is a positive indicator for shareholders, it does not guarantee that future dividends will remain at this level if market conditions change.
3. International Seaways, Inc. (NYSE:INSW)
Number of Hedge Fund Holders: 27
Dividend Yield as of October 23: 18.23%
International Seaways, Inc. (NYSE:INSW) owns and operates oil tankers that transport crude oil and refined petroleum products worldwide. Its high dividend yield reflects the strong cash flows generated during favorable tanker-market conditions, rather than a fixed income stream.
In the second quarter of 2026, the company’s time charter equivalent revenue rose 130% year over year to $434.2 million as average daily tanker rates increased sharply. The company follows a variable dividend policy, generally distributing at least 85% of adjusted net income to shareholders in strong periods. It paid $6.70 per share in dividends declared or paid during 2026 through its August announcement, including a $5.05-per-share payout. The supplemental portion can shrink when tanker earnings weaken, so investors should not treat the current yield as guaranteed.
Hedge fund activity also signals interest in the company’s cash-generation potential. Insider Monkey’s visible holdings data shows CastleKnight Management increased its position by 103% and AQR Capital Management by 16%, while Hosking Partners reduced its stake by 12%. These contrasting moves suggest selective interest, not universal confidence. The investment case rests on strong tanker rates, cash returns, and fleet value, but earnings remain sensitive to shipping demand and geopolitical disruptions.
Find what other shipping stocks analysts are bullish on: 10 Best Shipping Stocks to Buy According to Analysts
2. AGNC Investment Corp. (NASDAQ:AGNC)
Number of Hedge Fund Holders: 28
Dividend Yield as of October 23: 16.29%
AGNC Investment Corp. (NASDAQ:AGNC) invests mainly in mortgage-backed securities guaranteed by US government agencies. It borrows money to buy these securities and profits from the difference between the interest earned on its portfolio and its funding costs.
AGNC’s high dividend yield reflects its monthly payout and the risks attached to its leveraged portfolio. In Q2 2026, it used 7.4 times leverage relative to tangible net book value at risk. Its net spread and dollar roll income fell from $0.42 per share in Q1 to $0.40 in Q2, against a quarterly dividend of $0.36. That left only $0.04 per share of coverage. AGNC declared monthly dividends of $0.12 per share during Q2. Its payout was covered by this income measure, but the narrowing margin leaves less room for further declines in earnings. Read the full analysis here.
Insider Monkey reported that 28 hedge funds held AGNC at the end of Q2 2026, down from 33 in the previous quarter, while their combined holdings fell from about $190 million to $120 million. Its latest accessible holdings data showed Millennium Management increasing its put-option position by 151%, while Citadel increased its put position by 65%. These are bearish or hedging trades, not straightforward evidence that the funds expect the stock to rise.
1. Dynex Capital, Inc. (NYSE:DX)
Number of Hedge Fund Holders: 29
Dividend Yield as of October 23: 18.68%
Dynex Capital, Inc. (NYSE:DX) is a mortgage REIT that invests primarily in agency mortgage-backed securities, backed by U.S. government-sponsored entities. It finances its purchases of these securities through borrowing and uses interest rate derivatives to hedge some of the risk. The high dividend yield is a reflection of the income nature of its leveraged portfolio and also of the risks of the borrowings, interest rate movements, and the market value of its assets. Read the company’s valuation analysis here.
Dynex currently has a dividend yield of nearly 19% because its common dividend is so large in relation to its share price. Mortgage REIT earnings are very sensitive to interest rates and financing costs. Q2 2026 saw Dynex generate $94.3 million in economic net interest income, up from $81.0m in Q1 as the portfolio grew, but its net interest spread was only 1.17%, which again highlights the fragility of its returns and the fact that they are so dependent on a very narrow spread between asset yields and the cost of funds.
Insider Monkey’s Q2 2026 data shows that 29 hedge funds held stakes in DX. Millennium Management upped its Dynex Capital position by 155% to 7.02 million shares, and Marshall Wace LLP increased its position by a massive 2919% to 6.41 million shares. Both are significant increases and suggest they saw an opportunity in the mortgage REIT, either in terms of income or the interest rate outlook. The filings themselves don’t state why they’ve made these purchases.
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