Income investors may choose dividend stocks to generate cash. At an average return of 1.6% for the S&P 500, they often outperform bank accounts and bonds in a low-interest-rate environment. When combined with the potential for long-term growth over time, such stocks make an appealing option. And though most stocks are not obligated to continue payouts, a history of consistent dividend hikes increases the likelihood that a stock's dividend growth will continue.

Additionally, some high-dividend stocks have ties to the consumer sector, and some are so successful that they can generate $1,000 annually on an investment of less than $20,000. Diversified investments in Verizon (VZ 0.32%), Realty Income (O 1.36%), and Walgreens (WBA 0.61%) can accomplish this goal.

1. Verizon

Admittedly, Verizon's dividend may appear as concerning as it is appealing. The $2.61 per share annual dividend yields a whopping 6.8%, more than four times the S&P 500 average. That means that to generate $333 annually, one must buy only 148 shares for around $5,600.

That fear has appeared in the stock. Over the last 52 weeks, it has fallen 26%, taking its price-to-earnings (P/E) ratio to just 8. Also, it has spent heavily to build out its 5G network -- almost $16 billion in the first three quarters of 2022.

Moreover, Verizon peer AT&T abandoned a 35-year streak of payout hikes amid massive debts. That may cast doubt over Verizon, which has increased its dividends for 15 straight years. Indeed, Verizon's $148 billion in total debt does not compare favorably to its $89 billion book value.

Nonetheless, it has generated over $12 billion in free cash flow over the last three quarters, allowing it to cover the $8 billion cost of that dividend during that time. Also, an emerging network-as-a-service offer -- a 5G subscription service that can power autonomous cars and other emerging technologies -- could create a lucrative revenue stream that could reinforce the safety of its dividend despite the high payout.

2. Realty Income

Realty Income owns standalone commercial properties. As a real estate investment trust (REIT), it must pay out at least 90% of its net income in the form of dividends.

This obligation has not stopped Realty Income from hiking its payout for 28 straight years, making it a Dividend Aristocrat. At an annual dividend of almost $2.98 per share, it produces a cash return of nearly 4.8%. With Realty Income, an investor can generate $333 annually by buying 112 shares for just under $7,000.

Realty Income owns more than 11,700 properties. And because they are net lease arrangements, the tenant covers taxes, maintenance, and insurance costs. More than 1,100 customers in 79 industries occupy almost 99% of its properties.

The company also stands out as the "monthly dividend company." Since most stocks pay their dividends quarterly, receiving cash every month adds to the stock's appeal.

Additionally, its adjusted funds from operations (AFFO), a measure of a REIT's free cash flow, came in at almost $1.8 billion in the first three quarters of 2022. That was enough cash to cover over $1.3 billion in dividend costs during that time. And with the dividend stock coming off its 52-week lows, now could be a great time to add shares.

3. Walgreens

Some of Realty Income's tenants provide a lucrative source for dividends, and Walgreens is a notable example.

The retail pharmacy chain is a Dividend Aristocrat, increasing its payout for 47 consecutive years. And at $1.92 per share annually, the dividend returns 4.6% at current prices. So to earn $333 per year, a shareholder would have to purchase 174 shares at the cost of about $7,200.

Still, Walgreens stock does carry some risk. In fiscal 2022, which ended Aug. 31, net earnings came in at over $4 billion. While that bankrolled $1.7 billion in dividend costs, investment losses led to negative free cash flow, which potentially placed pressure on the dividend.

Investors should also note the 42% drop in the stock price over the last five years. While this has led to a P/E ratio of 8 for the stock, it shows how increased retail competition has fostered a need for a new approach.

That change has come from purchasing primary care provider VillageMD for $5.2 billion. By 2027, Walgreens plans to co-locate up to 1,000 VillageMD locations inside Walgreens stores, meaning a customer can shop while visiting a primary care physician.

Admittedly, the VillageMD purchase could be a make-or-break strategy, as rising competition has forced it to act. However, if the move improves Walgreens' financials, it would likely not only mean continued payout hikes but also serve as a strong tailwind for Walgreens stock.