Billionaires are buying up these two super-high-yield stocks in a big way. Are they a smart choice for your portfolio?

Investors looking for stocks that generate significant passive income may want to take a look at the recent activity of some of the world's most successful investors. In the final three months of 2023, billionaire hedge fund manager Ken Griffin(K)en Griffin)Place Citadel Advisors in theHercules Capital (Hercules) Capital (New York Stock Exchange: HTGC)) position has more than doubled.

Hercules' rate of return is benchmarkedStandard & Poor's 500That's more than six times the average dividend-paying stock in the index. And that's not the only super-high-yielding stock that billionaires are buying up. Israel Englander puts Millennial Gwen & Co.(Millennium)Management)To the tobacco giantsAltria Group (NYSE: MO)s bets raised 51% to over 2.2M shares in 4Q2023.

Hercules Capital

Hercules Capital is a business development company (BDC) that makes investments in innovative technology and life science companies accessible to ordinary investors. Among its portfolio companies are success stories, includingAxsome Therapeutics,Palantir Technologies respond in singingTransmedics GroupThe

Investors looking for passive income like to buy BDCs because these corporations are not subject to income tax as long as they return at least 90% of earnings to shareholders as dividends.Hercules pays a regular quarterly cash dividend of $0.40 per share, which yields 8.8% at recent prices.

The majority of Hercules Capital's assets are invested in warrants, equity and option-linked debt. The value of these assets can be unpredictable, so BDC pays a supplemental dividend each year. The most recent was declared in February at $0.32 per share, or $0.08 per share per quarter.

If we assume that next year's supplemental dividend is in line with this year's, the stock yields 10.6% at recent prices, though the supplemental dividend fluctuates from year to year. Investors need to remember that some years are better than others, as many of the BDC's somewhat risky investments will lose money while others will generate multiple returns.

Altria Group

Income-seeking investors who are more interested in steady dividend growth than dividend growth may want to look at Altria Group, which sells Marlboro in the U.S. market. Last August, the company raised its dividend payout for the 58th time in 54 years.

Over the past five years, Altria's dividend payout ratio has only grown by 22.51 TP3T, but it still generates a lot of passive income. At recent prices, it yields a whopping 9.5%.

Smoking rates have been declining for decades, but the recent losses have been more severe than ever. Last year, the number of combustible cigarettes sold by Altria declined by 9.9%. The stock offers an exceptionally high yield because the market is concerned that intense competition from flavored e-cigarette products, such as flavored cigarettes, will result in unsustainable profit gains.

Unbeknownst to many fans of the bar, the U.S. Food and Drug Administration (FDA) banned flavored electronic vapor products in 2020. Although enforcement has been ineffective, government agencies have stepped up their enforcement efforts in recent months. Last December, the FDA and the Customs and Border Protection Department jointly seized 41 batches of illegal electronic vapor products. So far this year, the FDA has issued warning letters for the sale of illegal e-cigarettes to 61 brick-and-mortar retailers and 19 online retailers.

Altria Group acquired NJOY in 2023, one of only three e-cigarette brands currently licensed for marketing by the FDA.

Despite being challenged by illegal flavored e-cigarettes, Altria Group's adjusted earnings grew 2.3% last year, and with the FDA ramping up enforcement of the flavor ban and the launch of NJOY, the legendary dividend-paying company is likely to grow earnings in the mid-single digits in 2024 and for many years to come.

Should you invest $1,000 in Hercules Capital now?

Before buying shares of Hercules Capital Corporation, consider the following:

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Cory Renauer owns shares of Axsome Therapeutics and TransMedics Group.The Motley Fool's position recommends Axsome Therapeutics, Palantir Technologies and TransMedics Group.The Motley Fool has a disclosure policy. The Motley Fool has a disclosure policy.

Billionaires are buying up these two high-yield dividend stocks in a big way. Are They Smart Choices for Your Portfolio? This post was originally published by The Motley Fool.