**Two Beaten-Down Dividend Stocks: Bargain or Trap?**
Investors seeking lucrative passive income streams may have noticed two established dividend payers, Walgreens Boots Alliance and Western Union, plummeting in value over the past year. With their shares hovering near 52-week lows, it’s natural to wonder if they’re undervalued gems or ticking time bombs.
Walgreens Boots Alliance has suffered a staggering 62% decline in the past 12 months, largely due to a dividend reduction from $0.48 to $0.25 per share. This drastic cut has pushed the stock’s yield to an enticing 11.5%. However, the company’s struggles run deeper. As one of the world’s largest prescription drug purchasers, Walgreens faces intense competition from vertically integrated pharmacy benefit managers (PBMs) like CVS Health, UnitedHealth Group, and Cigna. Without a robust PBM of its own, Walgreens’ pharmacy operation is unlikely to regain profitability. Furthermore, its foray into primary care services has been marred by a massive impairment charge. While the stock may seem like a bargain at 4.6 times forward-looking earnings, its uncertain future makes it a risky bet.
Western Union, on the other hand, has lost over half its value since its 2020 peak. Despite offering an attractive 8% yield, the company faces stiff competition from newer remittance providers like Remitly and Wise. These upstarts are aggressively gaining market share, forcing Western Union to improve exchange rates and sacrifice profit margins. With revenue declining 4% year over year and no dividend increases since 2021, Western Union’s future looks uncertain. Trading at 6.7 times forward-looking earnings, the stock may appear cheap, but its dwindling market share and intense competition make it a cautionary tale.
In both cases, investors should exercise caution before diving in. While the yields may be enticing, the underlying businesses face significant challenges that could further erode their profitability and dividend payouts. It’s essential to carefully evaluate these companies’ ability to adapt and thrive in their respective industries before investing.
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