We cannot claim that the healthcare sector is a breeding ground for high-dividend stocks. Nevertheless, there are Walgreens Boots Alliance (NASDAQ: WBA)with a dividend yield of almost 10%.

However, there is a catch: the pharmacy chain operator’s shares have performed significantly worse than the benchmark. S&P500 Index, which has fallen nearly 60% year-to-date. Therefore, we have to call Walgreens stock risky. For those willing to take a risk, here’s a look at how many shares it would take to generate a $1,000 annual dividend payout from the company.

Even after a sharp drop, still a dividend yield

Walgreens’ current payout actually represents a significant reduction from previous levels. At the start of 2024, the company announced a nearly 50% dividend cut, reducing its quarterly payout from $0.48 to $0.25 per share.

Assuming management doesn’t cut the price again by the end of the year, that $0.25 per share is exactly $1 on an annualized basis. That makes our math simple (yay!) – an investor would need 1,000 shares of Walgreens to earn that $1,000.

I must stress here that Walgreens is a risky investment given the company’s current state. Management has admitted that nearly a quarter of its 8,000+ U.S. stores are unprofitable, and expanding medical clinic stores is an expensive endeavor that may not yield significant profits. Sales growth has not been impressive recently, and the company posted more net losses than profits last year.

High return meets high risk

While Walgreens has numerous strengths it can leverage, such as its high name recognition in the U.S. market and its ubiquity, it comes across as a bloated company that needs to make the right cuts. I doubt that in-store clinics are the answer—Americans tend to trust their regular doctors more—or that closing unprofitable stores alone will solve the problem. I don’t think this stock is a buy, no matter how tempting and alluring the high dividend may be.

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Eric Volkman does not own any stocks mentioned. The Motley Fool does not own any stocks mentioned. The Motley Fool has a disclosure policy.

Want $1,000 in dividend income? Here’s how much you need to invest in Walgreens stock was originally published by The Motley Fool