Buy The Dip for These Bargain Dividends; Yields of Up To +9.5%

Mr. Market is an emotionally driven business partner who constantly overestimates and underestimates the value of businesses on a day-to-day basis. But what Mr. Market deems the value of a business doesn’t reflect what you or I should sell it for. In his 1997 letter to shareholders, Warren Buffett asked a simple question to readers

“If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?” – Warren Buffett

At High Dividend Opportunities, we are buyers of income-producing securities, and appreciate a good bargain. Lower prices in quality companies doesn’t make us fearful, they make us hungry for more. In that spirit, let us now discuss two excellent dividend stewards that have experienced price declines this year, but offer healthy yields backed by robust fundamentals.

Pick #1: WES – Yield 9.5%

Western Midstream Partners, LP (WES) is a relatively smaller midstream operator with extensive infrastructure comprising over 14,000 miles of pipeline, 21 gathering systems, and 77 processing facilities, in the highly productive basins Delaware and DJ Basin.

Note: WES issues a Schedule K-1 to investors.

WES operates with leverage at sector-leading 3x Adj. EBITDA levels, and the company is self-funding its growth CapEx, while pursuing unit repurchases, and growing its distributions.

During Q2, the company reported $33 million in FCF after distributions.

95% of WES natural gas contracts and 100% of its crude oil and NGL contracts are fee-based, with minimum volume commitments, providing a high degree of predictability to its cash flows, effectively shielding its profitability from commodity price volatility.

For FY 2025, WES expects low- to mid-single-digit throughput growth across all segments, and management has affirmed the Adj. EBITDA guidance is between $2.35 and $2.55 billion, and it expects Free Cash Flows between $1.275 and $1.475 billion, adequately covering its current distribution levels. At current prices, WES is the cheapest publicly traded midstream MLP and offers a hefty 9.5% yield.

Pick #2: ARCC – Yield 9.6%

Ares Capital Corporation (ARCC) is a premium Business Development Company (BDC) that focuses on the upper-middle market. As such, this BDC has consistently commanded a premium valuation, but is now trading at par with its NAV. This is correlated with a broader downtrend across BDCs as the market views rate cuts as a pressure on their earnings.

ARCC makes money by lending at floating rates, with 69% of its assets tied to floating rates as of June 30, 2025, which will immediately produce lesser interest income as rates slide. Another factor that worries the markets is concerns around credit quality, and a potential recession. A 100bps cut is likely to reduce ARCC’s NII by $17/share, according to the company’s projections, but those don’t assume any new origination activity. Declining interest rate increases the demand for borrowing, and BDCs can leverage up to cater to this demand. ARCC ended Q2 with modest 0.98x leverage, compared to over 1.2x in 2021.

A BDC can earn from a few loans issued at higher interest rates, but can also earn well from a greater volume of loans issued at lower rates. This premium BDC has delivered for shareholders over the long term, and trades at an attractive valuation, offering a healthy 9.6% yield.

Conclusion

As consumers, we are going to be buyers of things over time. If milk is on sale at the grocery store, we don’t panic about the bottles in our refrigerator and try to sell it before they drop more – we would most likely rush to the store and pick up a few more bottles before they disappear from the shelves.

This mindset is true for every consumer product or service, but it works the opposite in the stock market. When prices drop, investors get fearful and sell. But as income investors, lower prices are an opportunity to buy more shares (and as a result greater income) at cheaper prices. We are taking care of the sell-off in key market sectors, and are augmenting our income. You can join us to do the same. This is the power of our Income Method – your key to a stress-free retirement.