Want an extra $500 in annual dividend income? Invest $5,890 in these three high-yield dividend stocks.

Investors who want to increase their passive income streams can do so without breaking the bank.

At the latest price Hercules Capital (HTGC 1.29%), Altria Group (Missouri -0.23%)and AT&T (tea 0.83%) It offers an average yield of 8.5% at recent prices. This is high enough to convert an initial investment of $5,890 into $500 in annual dividend income.

There are now many dividend stocks with much higher yields. These three companies stand out because their underlying businesses appear capable of meeting their current obligations and generating higher returns in the years to come.

1. Hercules Capital

Hercules Capital is a business development company (BDC) that allows anyone with a brokerage account to participate in exciting venture capital investments. For example, Hercules invested in: Palantir Technologies This was years before it was publicly traded. These days, Palantir boasts a stock market valuation of over $50 billion.

Many of Hercules Capital’s investments will fail, but winners like Palantir will more than offset the losses. Since 2010, the BDC has doubled its regular quarterly dividend from the current $0.20 per share to $0.40 per share.

Every year Hercules declares an additional dividend divided into four equal parts. Current investors are entitled to an additional quarterly dividend of $0.08 per share. If the next additional dividend stays the same, investors would receive a 9.9% return on this stock over the next year.

Hercules shareholders can reasonably expect more Palantir-like investments in the future. In the first quarter, BDC achieved $956 million in debt and equity commitments, a new company record.

2. Altria Group

Altria Group is a large tobacco company that sells the leading Marlboro brand throughout the United States. Juul, the first attempt to convert adult smokers to e-vapor products, was initially successful but ultimately failed when the Food and Drug Administration (FDA) banned flavored vaporizers. (FDA) was enacted several years ago.

Altria Group offers a dividend yield of 9% at recent prices. The stock price is under pressure because investors are nervous about the company’s ability to raise its dividend. Overall cigarette sales in the first quarter decreased by 10%.

Although cigarette sales have declined, the amount of nicotine consumed is still increasing roughly at the rate of population growth. Although many consumers have turned to illegal flavored e-vapor products like Elf Bar, illegal e-vapor products will become more difficult to access in the future. The number of e-vapor import refusals monitored by the FDA jumped to 452 in the first quarter, up from four in the same period last year.

Altria Group is well-positioned to benefit from the FDA’s strengthening of its fragrance ban. Last year, we launched NJOY, the only FDA-cleared pod-based e-vapor system. The company shipped one million NJOY devices and 10.9 million consumable pods in the first quarter.

Despite declining cigarette sales and competition in the illicit e-cigarette market, Altria Group expects its adjusted revenue to increase 2% to 4.5% this year. Dividend payments probably won’t be the fastest growing thing in your portfolio, but they’ll likely continue to move steadily in the right direction.

3. AT&T

AT&T has far fewer competitors than Altria Group. Fifth-generation (5G) wireless networks have been expensive to build, but they are one of three options Americans are following. T-MobileAcquired Sprint in 2020.

As the second-largest member of the U.S. three-way telecom oligopoly, AT&T is well-positioned to deliver a steadily increasing dividend. At recent prices, the stock offers a dividend yield of 6.6%.

AT&T’s broadband Internet division was losing wireline customers to competitors’ fixed wireless services. That trend has been reversed thanks to the launch of AT&T’s fixed wireless Internet service late last year and the continued uptake of fiber-optic service for customers in its range.

AT&T reported free cash flow of $16.8 billion last year, and expects that number to reach $17 billion to $18 billion this year. This would be enough to significantly reduce its debt load while maintaining its current dividend commitments. At its current rate of debt reduction, we wouldn’t be surprised if AT&T starts raising its payout again in 2025. Buying some shares of a large telecom company to hold for the long term is a great way to increase your passive income stream.