Not all dividend stocks are created equally — especially those with 4%-plus yields.

When the curtain closes on 2022 in roughly two and a half months, Wall Street professionals and everyday investors are likely to look back on this year as one of the most trying on record. Since the ageless Dow Jones Industrial Average , all-encompassing S&P 500 , and growth-driven Nasdaq Composite hit their respective all-time highs, they’ve all, respectively, plunged firmly into a bear market .

On one hand, the rapid declines that accompany bear markets can test the willingness of investors to stick around. On the other hand, history has conclusively demonstrated that putting your money to work during these downturns is a genius move. That’s because every double-digit decline in the major U.S. stock indexes has eventually been put into the rearview mirror by a bull market.

In other words, the real challenge for investors right now should be figuring out what stocks to buy. Arguably the best answer might be dividend stocks . Image source: Getty Images. Dividend stocks offer plenty of promise but can also have a dark side

Companies that pay a regular dividend to their shareholders almost always have transparent long-term growth outlooks and are profitable on a recurring basis. What’s more, they’re typically time-tested, which means they’ve navigated their way through an economic downturn before.

But the best aspect of income stocks is their long-term outperformance . Nine years ago, J.P. Morgan Asset Management issued a report that compared the 40-year returns of companies that initiated and grew their payouts between 1972 and 2012 to companies that didn’t offer a dividend. Over four decades, the dividend stocks delivered an annualized return of 9.5%, which compared quite favorably to the non-payers that trudged their way to an average annual return of just 1.6%.

However, no two dividend stocks are alike. Although income investors would like the highest yield possible with the least amount of risk, studies have shown that risk and yield tend to go hand-in-hand when payouts top 4% (i.e., high-yield status). Since yield is a function of payout relative to share price, a struggling business with a falling share price can lure unsuspecting investors into a yield trap.

Thankfully, not all high-yield income stocks are bad news. What follows are two high-yield dividend stocks that investors can confidently buy hand over fist, as well as one high-yielder they’d be best off avoiding like the plague. High-yield stock No. 1 to buy hand over fist: Walgreens Boots Alliance (5.8% yield)

The first supercharged income stock that’s a screaming buy for value-oriented investors is pharmacy chain Walgreens Boots Alliance ( WBA 0.88%). Walgreen’s is a Dividend Aristocrat that’s raised its base annual payout in each of the past 47 years. Its nearly 6% yield marks its juiciest payout on record.

Normally, healthcare stocks are viewed as highly defensive, and are therefore fairly immune (pardon the pun) to recessions and economic downturns. But in Walgreens’ case, the initial stages of COVID-19 lockdowns decimated foot traffic into its brick-and-mortar retail locations. Because the company is so reliant on its physical stores, its bottom line took a direct hit. But where there’s pain, there’s often opportunity.

For years, Walgreens Boots Alliance has been undertaking a multipoint turnaround strategy that’s focused on increasing its operating margin, lifting its organic growth rate, and improving customer loyalty. In virtually all aspects of its strategy, the company appears to be on track or ahead of schedule.

For example, the company ended fiscal 2021 (Walgreens’ fiscal year ends on Aug. 31) having reduced its annual operating expenses by more than $2 billion. That was more than expected, and a full year ahead of schedule.

But Wall Street is far more interested where Walgreens Boots Alliance is spending its money than where it’s cutting costs. In this respect, it’s aggressively spent money to upgrade its direct-to-consumer platform , as well as partnered with (and invested in) VillageMD to open as many as 1,000 co-located, full-service health clinics by the end of 2027. Having a larger online presence should boost its organic growth rate. Meanwhile, offering physician-staffed clinics provides an impetus for customers to frequent their local Walgreens.

Valued at just 7 times the midpoint of its forecast earnings for fiscal 2023, Walgreens is historically cheap. High-yield stock No. 2 to buy hand over fist: Enterprise Products Partners (7.6% yield)

The second high-yield dividend stock that can be bought hand over fist by income-seeking investors is energy stock Enterprise Products Partners ( EPD -1.14%). Enterprise is working on a 24-year […]

source 2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid Like the Plague

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