1 Absurdly Cheap High-Yield Dividend Stock I Just Bought

Walgreens Boots Alliance (WBA -1.18%) stock is a steady performer with a very enticing dividend yield. In this video clip from "The Rank" on Motley Fool Live, recorded on July 27, Fool.com contributors Matt Frankel and Jason Hall examine several factors that make it quite appealing for investment.

Matt Frankel: What shocked me when I did a little research for the show is Walgreens has a 5% dividend yield right now. It's increased the dividend for the last 47 consecutive years. To be fair, this year's increase was 0.5%. They did it just so they can say they kept their streak alive. If we're being honest.

Jason Hall: That's fair.

Frankel: But that's still an impressive track record. Down 30% from the peak. It's a very resilient business and they're really trying to build out the healthcare side of the business, like how CVS (CVS -0.65%) is doing. So I won't say too much on this. I have to believe that the Walgreen health segment is one of the big parts of your thesis though.

Hall: It really is because, at the end of the day, I think just the core pharmacy business is fine, but it is limited with growth and it's becoming as we've seen more competitive with the Walmarts (WMT 0.57%) of the world, Amazon (AMZN -1.65%) obviously has health ambitions and it's important that Walgreens has to adapt.

I'm a big Roz Brewer fan. I think I've done a pretty good job of just beating up Starbucks (SBUX -1.02%) who is in this massive trying to figure out who their next CEO is going to be and they had Roz Brewer a year-and-a-half ago and she left to take on Walgreens Boots Alliance and I'm a big believer in her as a leader and I think she has the vision to see how the company needs to expand and how it needs to grow.

So it's a little bit of a turnaround story, but I think this is like a good turnarounds story to invest in where it's a very profitable business. It's a cash-cow business, it's relatively resilient because of most of the things that it sells, people are going into Walgreens because well, they're there for prescriptions or other healthcare items and there are goods that people need to buy no matter what the economic environment is.

So I think that's healthy. I think if they can do a good job continuing to expand and scale on getting healthcare services into those locations, they leverage the real estate which are mostly really well-located already, give more people access to care that they might not have at affordable prices, and you build a new layer and you layer on top of that and it really came down to valuation.

This is a stock that trades for just barely over six times earnings and their earnings are not at risk, their earnings are safe. Great cash flows. Take that low expectations for the market with that 5% yield and it's not going to take very much over the next five years for this to be a stock that's going to outperform the market.

Frankel: Here's just a question, I don't know if you have a good answer to, but out of that 30% fall from the peak, how much of that do you think is because Amazon's getting into healthcare?

Hall: I think it's part of it and I think it's not just Amazon, but I think it's more broadly how you, again, think about what CVS has done. CVS has been the leader here with expanding with healthcare in the pharmacy and then all of their pharmacy management stuff. They own insurance, right.

Walgreens has just muddled along and they merged with Boots from the U.K. six or seven years ago as much as a tax arbitrage move [laughs] as anything else. They haven't really done much yet. I think there's a lot of prove-it mode from the market while looking at the Amazons of the world that are beginning to do more and more and starting to box out Walgreens.