Investing in 2022 hasn't been easy. Since the beginning of the year, the benchmark S&P 500 lost as much as 24% of its value, while the tech-heavy Nasdaq Composite (^IXIC -2.05%) shed almost 33% at its peak. Historically high inflation, domestic economic weakness, and heightened geopolitical tension (e.g., Russia invading Ukraine) have all contributed to the S&P 500 and Nasdaq pushing into a bear market.
But when bear markets arise, so does opportunity for patient investors. It's a particularly smart time to consider adding dividend stocks to your portfolio.
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Companies that pay a regular dividend are almost always profitable and time-tested. Perhaps most important, they have a rich history of substantially outperforming non-dividend-paying stocks over long periods. Whether the stock market is rising or falling, income stocks often have the tools and intangibles necessary to outperform.
With the Nasdaq still entrenched in a bear market as of this past weekend, the following three high-yield dividend stocks (i.e., companies with yields of 4% or above) look like genius buys that can double your money, including payouts, by 2026.
Walgreens Boots Alliance: 5.02% yield
The first passive-income powerhouse that can double your money over the next four years, including dividends paid, is pharmacy chain Walgreens Boots Alliance (WBA 3.69%). Keep in mind that Walgreens is a Dividend Aristocrat and has raised its base annual payout in each of the past 47 years.
Normally, healthcare stocks are pretty much impervious to economic downturns. Since people can't control when they get sick or what ailment(s) they develop, there's always a demand for prescription drugs, medical devices, and preventative care. However, Walgreens found out during the pandemic that its foot-traffic-driven retail stores are susceptible to significant weakness during pandemic-based lockdowns.
The silver lining? This short-term weakness has passed. Investors now have an opportunity to buy into a highly profitable healthcare company that's in the midst of a multiyear turnaround designed to boost operating margins, lift its organic growth rate, and improve customer loyalty.
As with most multipoint corporate strategies, Walgreens Boots Alliance is trimming the fat. It's eliminated more than $2 billion in annual operating costs a full year ahead of schedule. But cutting costs isn't what should turn heads. Rather, it's where the company is deploying capital that's of real interest.
For example, Walgreens has invested heavily in digitization initiatives. In particular, the company aims to promote direct-to-consumer shopping, along with drive-thru order pickup. Even though its brick-and-mortar presence should remain its dominant driver of sales, online orders have the potential to generate better margins and sustain a double-digit percentage organic growth rate.
Walgreens Boots Alliance is also fully invested in its partnership with VillageMD. Aside from owning a majority stake in VillageMD, this dynamic duo plans to open as many as 1,000 full-service, co-located health clinics in over 30 U.S. markets by 2027. The key phrase here is "full-service." Offering physician-staffed clinics is a true differentiator that should drive repeat business.
At less than eight times Wall Street's forecast earnings for 2022, Walgreens is ripe for the picking by value and income investors.
Alliance Resource Partners: 6.6% yield
A second high-yield dividend stock begging to be bought during the Nasdaq bear market is coal producer Alliance Resource Partners (ARLP 0.19%). Feel free to take a moment and gather yourself: I did say "coal producer."
Pretty much all energy commodity producers were hammered during the COVID-19 pandemic. The coal industry was hit especially hard given the push toward renewable energy sources in most developed countries over the past decade. With most coal stocks heavily indebted, the industry has been virtually off-limits from an investment perspective -- with the exception of Alliance Resource Partners.
The first thing investors are liable to notice about Alliance Resource Partners is its generally conservative approach to reinvestment and acquisitions. Whereas most coal companies are still trying to dig their way out of precarious debt piles, Alliance Resource ended June with a debt-to-equity ratio of less than 33%. With net debt of $321.8 million, yet trailing-12-month operating cash flow of $502.3 million, the company offers superior financial flexibility compared to its peers.
Something else to consider is the company's remarkably transparent and predictable operating cash flow. Alliance Resource Partners' not-so-subtle secret to success is locking in price and volume commitments up to four years in advance. Well over 90% of the 35.5 million tons to 37 million tons of coal expected to be sold this year has been locked and priced. More importantly, 29 million tons of the company's expected 36.5 million tons to 38 million tons of forecast sales in 2023 are already locked in. With the price of coal soaring in 2022, the company has been able to lock in commitments well above its previous guidance.
Were this not enough, Alliance Resource Partners also owns oil and gas royalty interests. The simple gist here is that if the price of crude oil and natural gas increases, Alliance Resource will generate a larger profit. With Russia invading Ukraine in February and major energy companies paring back investments over the past two years due to the pandemic, the price for crude oil and natural gas has, indeed, soared.
The cherry on top is that management has stated its intent to increase the company's distribution by 10% to 15% per quarter throughout 2022. Already yielding 6.6%, Alliance Resource Partners could easily end the year paying out well in excess of 7%.
Priced at an absurdly inexpensive four times Wall Street's forward-year earnings, Alliance Resource Partners looks like a screaming buy that can double your money in four years.
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Enterprise Products Partners: 7.04% yield
The third high-yield dividend stock that can double your money by 2026 in the wake of the Nasdaq bear market is Enterprise Products Partners (EPD 1.41%). Enterprise Products has raised its payout in each of the past 24 years, and its 7% yield is the juiciest among the three high-yield companies being discussed.
To echo what was said about Alliance Resource Partners, energy stocks went through one heck of a rough patch during the initial stages of the COVID-19 pandemic. Domestic and global lockdowns led to historic demand drawdowns for oil and gas. In fact, West Texas Intermediate crude oil futures briefly hit negative $40 a barrel in April 2020. While this turmoil crippled oil and gas drillers in the short run, Enterprise Products Partners was left virtually unscathed.
What differentiates Enterprise Products Partners is that it's a midstream oil and gas stock. It operates more than 50,000 miles of transmission pipeline, can store 14 billion cubic feet of natural gas, and oversees 19 deepwater docks and 24 natural gas processing facilities. Midstream operators typically rely on fixed-fee contracts that ensure highly predictable operating cash flow no matter how volatile crude oil and natural gas prices become. Being able to accurately forecast annual operating cash flow is imperative when outlaying capital for new infrastructure projects, acquisitions, and distributions to investors.
Speaking of acquisitions, Enterprise Products Partners has made bolt-on deals a somewhat common occurrence. In February, it closed on a $3.25 billion deal to buy Navitas Midstream. The Navitas deal added more than 1,700 miles of transmission pipeline, another natural gas processing facility, and is expected to boost distributable cash flow by a midpoint of $0.20 per unit in 2023.
The company also finds itself in the right place at the right time, with oil and gas prices hitting multidecade highs earlier this year. Although the company is well protected by its fixed-fee contracts in the event of declining energy commodity prices, sustained high prices should help encourage additional upstream drilling and exploration activity. Translation: Energy infrastructure demand should continue to grow.
At approximately 10 times Wall Street's forward-year forecast earnings, Enterprise Products Partners isn't as cheap as it was at this time last year. But with oil and gas prices expected to remain elevated for years to come, the company is in a perfect position to take advantage of increased drilling activity. This gives it a good chance to double your money, including payouts, by 2026.
