Investors love dividend stocks, especially the high-yield variety, because they offer a significant income stream and have massive total return potential. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation.
Fallen angel is a category usually used for bonds that start with an investment grade rating and then get downgraded to junk bond status. Fallen angel stocks take many routes to achieve their dubious status. Some are removed from indices they have been in for years, some cut or fail to raise their dividends and are booted from the Dividend Aristocrats, and some are just run by people who do a lousy job at the top. For whatever reason, we found three in which the option activity has ticked up and the stock could be ready to follow the option volume. Despite the fallen angel status, all have Buy ratings at the top Wall Street firms we cover.
Why do we cover ultra-high-yield stocks?
While not suited for everybody, those trying to build strong passive income streams can do exceptionally well with some of these top companies in their portfolios. Paired with more conservative blue-chip dividend giants, investors can use a barbell approach to create significant passive income streams.
Dow
This fallen angel is a materials science company that offers a wide range of products and services.
This company was removed from the Dow Jones industrials last year after a five-year stint and offers investors growth and income potential with a huge 7.2% dividend. Dow Inc. (NYSE: DOW | DOW Price Prediction) is a leading materials science company formed by the merger of Dow and DuPont in 2017 and subsequent spin-off in 2019.
The company is organized into three principal divisions:
- Performance Materials & Coatings
- Industrial Intermediates & Infrastructure
- Packaging & Specialty Plastics
The company’s segments include Agricultural Sciences, which provides crop protection, seed/plant biotechnology products and technologies, urban pest management solutions, and healthy oils.
Consumer Solutions, which consists of:
- Consumer Care
- Dow Automotive Systems
- Dow Electronic Materials
- Consumer Solutions-Silicones businesses
Infrastructure Solutions, which consists of:
- Dow Building & Construction
- Dow Coating Materials
- Energy & Water Solutions
- Performance Monomers and Infrastructure Solutions businesses
- Performance Materials & Chemicals consists of Chlor-Alkali and Vinyl, Industrial Solutions and Polyurethanes businesses
- Performance Plastics, which consists of Dow Elastomers, Dow Electrical and Telecommunications, Dow Packaging and Specialty Plastics
- Energy and Hydrocarbons business
Kohl’s
This fallen angel has 1,165 locations, operating stores in every state except Hawaii.
This top retailer offers a massive 10.91%, which seems to be threatened with constant cut rumors. Even if cut in half, it would still be respectable. Kohl’s Corp. (NYSE: KSS) operates department stores in the United States.
It provides private label, exclusive, and national brand apparel, footwear, accessories, beauty, and home products to children, men, and women customers. The company also sells its products online at Kohls.com and through mobile devices.
The company provides its products primarily under the brand names of:
- Croft & Barrow
- Jumping Beans
- SO
- Sonoma Goods for Life
- Food Network
- LC Lauren Conrad
- Nine West
- Simply Vera
- Vera Wang
Kohl’s partners with Amazon.com Inc. (NASDAQ: AMZN), where customers can return items through the retailer. Some feel the deal should be expanded with a full partnership or even Amazon buying Kohl’s.
Walgreens Boots Alliance
This fallen angel was the worst-performing stock in the S&P 500 in 2024.
This huge drugstore chain is a safe retail play, and was paying a huge 10.85% dividend, which was cut almost half this time last year. Walgreens Boots Alliance Inc. (NYSE: WBA) is a pharmacy-led health and beauty retail company with three segments:
- Retail Pharmacy USA
- Retail Pharmacy International
- Pharmaceutical Wholesale
The Retail Pharmacy USA segment sells prescription drugs and various retail products, including health, wellness, beauty, personal care, consumables, and general merchandise, through its retail drugstores.
It also provides specialty pharmacy services and mail services. This segment operates nearly 10,000 retail stores under the Walgreens and Duane Reade brands in the United States and six specialty pharmacies.
The Walgreens Retail Pharmacy International segment is a testament to its diverse product offerings. It sells prescription drugs, health and wellness products, beauty products, personal care products, and other consumer products through its pharmacy-led health and beauty stores and optical practices.
The International segment has operations in:
- The United Kingdom
- Thailand
- Norway
- The Republic of Ireland
- The Netherlands
- Mexico
- Chile
The company also operates 550 optical practices, including 165 on a franchise basis.
The Pharmaceutical Wholesale segment wholesales and distributes specialty and generic pharmaceuticals, health and beauty products, and home healthcare supplies and equipment and provides related services to pharmacies and other healthcare providers.
Walgreens fiscal first-quarter results were way ahead of Wall Street expectations. In addition, the company is cutting costs and closing thousands of stores over the next few years. There are also were rumors that the company could be taken private which seemed to be over for now. Walgreen’s suspended their dividend in a cost-cutting move last week, and while it is not clear when it will be started back up, the stock offers solid value at current trading levels.
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