Some investors view high dividend yields in a negative light. They think any stock with an especially high yield is one to avoid.
Others, though, embrace such stocks. There are even investing strategies focused on buying blue-chip stocks in the Dow Jones Industrial Average with the highest yields. The idea is that these stocks tend to be more attractively valued.
Should you buy the three highest-paying dividend stocks in the Dow Jones right now? Here they are -- and whether or not they're good picks.
1. Walgreens Boots Alliance
Walgreens Boots Alliance (WBA +0.00%) easily ranks at the top of our list. The retail and wholesale pharmacy giant's dividend yield currently stands at nearly 8.4%. Walgreens' yield is sky-high in large part because of its dismal stock performance. The company's share price has plunged close to 40% in 2023 and fell sharply in 2022 as well.
NASDAQ: WBA
Key Data Points
Income investors have liked Walgreens for a long time thanks to the company's 47-year track record of dividend increases. However, it appears that streak is about to end. Walgreens hasn't announced a dividend increase this year, and time is quickly running out.
One other side effect of Walgreens' steep stock decline is that it has a bottom-of-the-barrel valuation. Shares trade at a forward price-to-earnings multiple of under 7x.
So is Walgreens stock a good choice to buy right now? I think that it depends on your investing style. The company faces continued business challenges and turnover in its executive team. I expect the stock to remain highly volatile. Risk-averse investors are probably best staying away.
On the other hand, highly aggressive investors seeking a potential long-term turnaround opportunity might like Walgreens. Keep in mind that the company may be forced to cut its dividend at some point, though.
2. Verizon Communications
Verizon Communications (VZ +0.65%) comes in second place among Dow stocks with its dividend yield of nearly 6.9%. In addition to this high yield, the company claims the best track record in the telecommunications industry with 17 consecutive years of dividend increases.
NYSE: VZ
Key Data Points
Investors didn't have much to cheer about with Verizon throughout much of 2023. By early in the third quarter, the stock was down more than 20% year to date. However, Verizon has made an impressive comeback and just might finish the year in positive territory.
This strong rebound is due to the company's better-than-expected third-quarter results. Most importantly, Verizon generated solid free cash flow and even raised its free cash flow guidance for full-year 2023 by $1 billion.
Verizon's dividend appears to be safe and likely to continue growing. The company operates in a highly competitive industry but is taking smart steps to attract new customers and retain existing ones. I think this Dow stock is a good pick for income investors.
3. 3M
The No. 3 highest-paying dividend stock in the Dow is 3M (MMM +1.45%). The large manufacturer's dividend yield tops 5.8%. 3M is also a Dividend King with 65 consecutive years of dividend increases.
I'm not confident that the company will keep its streak of dividend hikes going, though. 3M agreed to pay $6 billion to settle litigation over allegedly faulty military-grade earplugs that it made. This hefty settlement could make it difficult for 3M to pay out its dividend at current levels.
Key Data Points
Like Verizon, 3M has mounted a comeback after its stock sank during the first three quarters of 2023. The company's Q3 update provided a much-needed catalyst, with increased full-year earnings and cash flow guidance especially helping.
I don't think that 3M is out of the woods just yet, though. My view is that most investors will be better off staying on the sidelines with the stock.
