2 Picks To Make Your Money Earn More Money

Lending money in exchange for interest has long been one of the oldest and most reliable methods of generating income and building wealth.

When you have excess capital and someone else needs it, you have an opportunity: by lending your money and being repaid with interest, you can earn a return simply for giving others access to your funds. Over time, this can compound into substantial wealth. This fundamental concept is at the heart of how financial institutions thrive—they use deposits from one party to lend to another, collecting interest while paying only a small return to the original depositor.

There are many forms of lending in today’s markets, but none are as widespread or familiar as mortgage loans. Since most people require financing to purchase a home, mortgage lending is not only common but also considered relatively low risk.

Today, we’re going to explore a different angle: how to profit from the companies and entities that profit from lending money.

Pick 1: JPM Preferreds – Up To 6% Yields

With over $4.5 trillion in total assets, J.P. Morgan Chase (JPM) is the largest bank in the United States and the fifth-largest globally. JPM is the top issuer of credit cards, supporting more than $1.344 trillion in purchase volume.

Over the years, JPM has been through several economic crises from a position of strength. During the Great Financial Crisis, when many banks failed or needed bailouts, JPM remained relatively healthy and acquired Bear Stearns and Washington Mutual at distressed prices. The bank used the crisis as an opportunity to expand its footprint in investment banking and retail banking. During the COVID-19 pandemic, JPM’s fortress balance sheet and high capital ratios enabled the bank to maintain lending and absorb shocks. The bank’s large deposit base benefited them significantly as rates began to rise rapidly in 2022-23.

During the regional bank stress in 2023, consumers pursued a flight to safety, and JPM gained billions in new deposits almost overnight. The bank also acquired First Republic to gain $203 billion worth of assets, including $173 billion in loans and $30 billion in securities.

JPM maintains an AA- rated balance sheet by Fitch Ratings, and spent $3.9 billion on dividend payments ($1.40/share) during the first quarter at a modest LTM payout of 62%. During Q1 2025, the bank spent $7.1 billion on common stock purchases. Between market returns, trading fees, asset management fees, interest income from loans and deposits, JPM’s revenue is attractively diversified to remain opportunistic in volatile markets.

JPM has four perpetual preferreds trading at attractive discounts to par.

• JP Morgan 4.75% Non-Cumulative Redeemable Perpetual Preferred Stock, Series GG (JPM.PR.J) – Yield 6%

• JP Morgan 4.55% Non-Cumulative Redeemable Perpetual Preferred Stock, Series JJ (JPM.PR.K) – 6%

• JP Morgan 4.625% Non-Cumulative Redeemable Perpetual Preferred Stock, Series LL (JPM.PR.L) – 6%

• JP Morgan 4.20% Non-Cumulative Redeemable Perpetual Preferred Stock, Series MM (JPM.PR.M) – 5.9%

  
  

These are non-cumulative due to regulatory requirements, but they enjoy strong safety from the bank’s earnings. These preferreds are rated BBB- by S&P and pay qualified dividends.

JPM spends $255 million on quarterly preferred stock dividends, while generating $14.6 billion in net income during Q1, implying 57x coverage for the payments. JPM-M carries a low 4.20% coupon, offering a 5.9% current yield and ~40% upside to par. Readers might say that this will never be called due to its low coupon, but that can be opportunistic for those seeking a steady ~6% yield for the foreseeable future.

Pick 2: NLY – Yield 14.6%

Annaly Capital Management (NLY) is a mortgage REIT that profits by borrowing at short-term rates and investing in long-term mortgage-backed securities (MBS), primarily agency-backed. Annaly's book value is near multi-decade lows because the price of MBS is near multi-decade lows. This is an asset with minimal credit risk, and agency MBS are highly correlated with US Treasury prices. With MBS prices near multi-decade lows and yields high, NLY has been buying higher-coupon assets, improving its earnings outlook.

Despite pressure from the inverted yield curve, NLY managed to maintain positive cash flow through hedging and has now reached a point where its interest income exceeds borrowing costs. This has allowed the company to raise its dividend—a trend we expect to continue.

As the Fed moves toward rate cuts, MBS prices could recover, lifting NLY’s book value. In the meantime, shareholders collect a very attractive income stream from a company benefiting from current market dislocations.

Conclusion

NLY and JPM Preferreds are two powerful ways to earn reliable income from companies that generate profits by lending money. With NLY, you collect payments made towards interest and principal through mortgage payments made by homeowners working to build equity. NLY earns by investing in mortgage-backed securities and profiting from the spread between borrowing costs and interest income. With JPMorgan’s preferred shares, you're investing in one of the world’s most established financial institutions that lends across the globe. These preferreds offer stability, strong backing from a well-capitalized bank, and steady income.

Both options allow your capital to work for you through lending activity. Together, they form a strong pair for generating income. This forms the basis of our Income Method, the pillar of our investing approach at High Dividend Opportunities.

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