Wondering Where To Find An Over 7% Annual Return? Check Out These 10 Investment-Grade Corporate Bonds
With interest rates remaining at their highest levels in over two decades, and with U.S. Treasury bonds comfortably exceeding a 4% yield, an increasing number of investors are turning their attention to the realm of corporate bonds.
In this landscape, they seek not only promising yield opportunities but also the strategic advantage of diversifying away from equity investments.
The Financial Times recently reported that inflows into corporate bond funds have surged to $22.8 billion in 2024, marking the first positive start to a year since 2019.
Corporate Bonds: Investment Grade Vs. High Yield
Corporate bonds come in two main types: investment-grade and high-yield. Investment-grade bonds are issued by financially stable companies, while high-yield (or speculative grade) bonds come from riskier firms but offer higher returns.
Rating agencies like S&P, Fitch and Moody’s determine which category a bond falls into based on the issuer’s ability to repay debts. Ratings range from AAA (very safe) to D (in default).
For example, companies like Nvidia Corp. (NASDAQ:NVDA), Amazon Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Eli Lilly Company (NYSE:LLY) and Walt Disney Co. (NYSE:DIS) are rated as investment grade.
Conversely, firms like AMC Entertainment Holdings Inc. (NYSE:AMC), Office Property Income Trust (NYSE:OPI) and Navient Corporation (NASDAQ:NAVI) belong to the speculative-grade world.
Read also: Top 10 US High-Yield Corporate Bonds With Returns Over 20% In April 2024
Comparison of Investment Grade And High Yield Bond Ratings
| Rating | Status |
|---|---|
| AAA | Investment Grade |
| AA+ | Investment Grade |
| AA | Investment Grade |
| AA- | Investment Grade |
| A+ | Investment Grade |
| A | Investment Grade |
| A- | Investment Grade |
| BBB+ | Investment Grade |
| BBB | Investment Grade |
| BBB- | Investment Grade |
| BB+ | High Yield |
| BB | High Yield |
| BB- | High Yield |
| B+ | High Yield |
| B | High Yield |
| B- | High Yield |
| CCC+ | High Yield |
| CCC | High Yield |
| CCC- | High Yield |
| CC | High Yield |
| C | High Yield |
| D | In Default |
The cutoff between investment-grade and high-yield is at the BB+ rating. Anything below BB+ is considered high yield, while BBB- or higher is investment-grade.
In general, the riskier the bond, the higher the potential return. Investment-grade bonds tend to offer lower yields because they are safer bets, with stronger financial health and better chances of repayment.
However, even within the realm of investment-grade bonds, there are opportunities to find attractive yields from companies with solid fundamentals.
This allows investors to earn better returns without taking on excessive risk, compared to investing solely in ultra-safe U.S. Treasuries.
Highest Yielding Investment-Grade Corporate Bonds As Of April 2024
Benzinga used the Public.com bond screener to discover which investment-grade corporate bonds offer the best yield as of April 2024.
Below are the top 10 investment-grade corporate bonds with the highest yields:
- PSEC 3.0% 05/15/2026
- Issuer: Prospect Capital Corp. (NASDAQ:PSEC)
- Yield: 8.16%
- Coupon: 3%
- Coupon Frequency: Semi-annually
- Price: $88.62
- Maturity: 05/15/2026
- PDM 2.75% 04/01/2032
- Issuer: Piedmont Office Realty Trust Inc. (NYSE:PDM)
- Yield: 7.75%
- Coupon: 2.75%
- Coupon Frequency: Semi-annually
- Price: $70.66
- Maturity: 04/01/2032
- SNX 1.25% 08/09/2024
- Issuer: Td Synnex Corp. (NYSE:SNX)
- Yield: 7.59%
- Coupon: 1.25%
- Coupon Frequency: Semi-annually
- Price: $97.94
- Maturity: 08/09/2024
- CHTR 5.875% 11/15/2040
- Issuer: Spectrum Management Holding Company Llc, owned by Charter Communications Inc. (NASDAQ:CHTR)
- Yield: 7.41%
- Coupon: 5.875%
- Coupon Frequency: Semi-annually
- Price: $85.47
- Maturity: 11/15/2040
- VNO 3.4% 06/01/2031
- Issuer: Vornado Realty Trust (NYSE:VNO)
- Yield: 7.32%
- Coupon: 3.4%
- Price: $78.49
- Maturity: 06/01/2031
- F 7.7% 05/15/2097
- Issuer: Ford Motor Co. (NYSE:F)
- Yield: 7.27%
- Coupon: 7.7%
- Coupon Frequency: Semi-annually
- Price: $105.88
- Maturity: 05/15/2097
- BAYG 5.875% 04/15/2038
- Issuer: Monsanto Co., owned by Bayer A.G. (OTCPK: BAYRY)
- Yield: 7.17%
- Coupon: 5.875%
- Coupon Frequency: Semi-annually
- Price: $88.66
- Maturity: 04/15/2038
- VICI 4.5% 09/01/2026
- Issuer: Vici Properties Inc. (NYSE:VICI)
- Yield: 7.17%
- Coupon: 4.5%
- Coupon Frequency: Semi-annually
- Price: $94.27
- Maturity: 09/01/2026
- ALLY 6.9% 02/15/2034
- Issuer: Ally Financial Inc. (NYSE:ALLY)
- Yield: 7.08%
- Coupon: 6.9%
- Coupon Frequency: Semi-annually
- Price: $98.75
- Maturity: 02/15/2034
- CNXC 6.85% 08/02/2033
- Issuer: Concentrix Corp. (NASDAQ:CNXC)
- Yield: 7.04%
- Coupon: 6.85%
- Coupon Frequency: Semi-annually
- Price: $98.73
- Maturity: 08/02/2033
Read now: Top 10 US Corporate Bonds By Market Performance In 2024: April Update
Image generated using artificial intelligence with Midjourney.