With two consecutive rate cuts now in the books, financial markets are transitioning to a lower interest rate environment. This makes high-yield dividend stocks like CTO Realty Growth (CTO) and Ares Capital (ARCC) stand out as reliable choices, offering attractive yields and well-covered dividend payouts.

Shares of these companies not only offer high yields; they're also backed by sustainable payouts. By diversifying across these high-yield stocks, investors can secure consistent income. Let’s understand why investors can rely on these dividend stocks.

#1. CTO Realty Growth (CTO) 

CTO Realty Growth (CTO) is a solid real estate dividend stock focused primarily on retail properties across high-growth U.S. markets. The real estate investment trust's (REIT) portfolio goes beyond standard retail spaces; their properties often feature large, multi-tenant setups anchored by essential businesses like grocery stores and community-focused hubs that integrate retail and mixed-use elements. This approach ensures steady traffic and a diverse, resilient tenant mix.

In addition to its core business, CTO holds an investment in Alpine Income Property Trust (PINE), another REIT. This provides a secondary growth avenue, diversifying the company's revenue streams and adding a layer of financial stability.

CTO Realty targets high-quality assets with the potential to boost income through leasing vacant spaces, increasing rental rates, and pursuing redevelopment opportunities. This strategy enhances immediate rental income and adds long-term value to the company's portfolio.

Its portfolio comprises 22 properties with a leased occupancy rate of 95.8%, highlighting robust demand for their spaces. In the latest quarter, CTO invested $191.3 million, achieving a weighted average yield of 9.5%. This includes a $137.5 million investment in three shopping centers in North Carolina and Florida.

CTO’s acquisition of three open-air shopping centers aligns with its growth strategy. These properties expand CTO’s geographic reach and bolster its presence in thriving markets.

Moreover, on the leasing front, CTO signed over 200,000 square feet of leases during the quarter at an average rent of $21.17 per square foot, bringing their year-to-date total to 385,000 square feet at an average rent of $23.74 per square foot. These figures illustrate the company’s ability to capitalize on leasing opportunities, with a signed but not yet open pipeline of $6.5 million in future rents—7% of its current cash base rent.

CTO also benefits from a well-structured debt maturity schedule, which provides the financial flexibility to pursue growth opportunities while maintaining its payouts. Further, the company has consistently paid dividends, demonstrating a strong commitment to rewarding shareholders and offering a high yield of over 7%.

Besides its high yield, Wall Street analysts are bullish about CTO Realty’s prospects, and maintain a “Strong Buy” consensus rating.

#2. Ares Capital (ARCC) 

Ares Capital (ARCC) is an attractive, high-yield dividend stock to consider now. It is a leading business development company in the U.S. that specializes in direct lending and investments to private middle-market companies, a sector with significant growth potential.

The company invests across multiple sectors, focusing on less cyclical industries. Further, a solid underwriting process helps minimize risks while maximizing returns. Moreover, ARCC maintains a strong balance sheet, which supports its growth.

Ares Capital is well-positioned to benefit from the increasing demand for private capital. Growing M&A activity, particularly in sponsor-backed transactions, provides a solid base for direct lenders like ARCC. During the latest quarter, Ares reviewed 30% more transactions compared to the same period last year, totaling approximately $155 billion in deal volume—surpassing the entire syndicated leveraged loan market. This active pipeline reflects Ares' strong relationships with sponsors and its focus on markets with defensive, long-term growth trends.

Ares Capital’s ability to expand its portfolio while maintaining a high standard of credit quality is positive. In the third quarter, 75% of new commitments were made to existing borrowers, enhancing underwriting confidence. ARCC added 23 new companies, bringing its portfolio to over 530.

The company’s nonaccrual rates decreased sequentially in Q3, and remain well below industry averages. This shows the resilience of its portfolio.

Ares Capital’s solid financial performance supports its compelling dividend yield of 8.9%, making it an attractive choice for income investors. Wall Street analysts echo this confidence, giving ARCC a “Moderate Buy” rating overall.

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