2 Ultra-High-Yield Dividend Stocks Are Near 52-Week Lows. Is It Time to Buy the Dips?

If you're an investor looking for stocks that can produce giant streams of passive income, you may have noticed a couple of well-established dividend payers have been beaten down a long way over the past 12 months.

The past year has been a lousy time for holding shares of Walgreens Boots Alliance (NASDAQ: WBA) and Western Union (NYSE: WU). Both of these dividend payers have been beaten down to near 52-week lows. At their beaten-down prices, it's only natural for everyday investors to wonder if they could be a bargain.

Here's a closer look at why these stocks are under pressure to see if they could be bargains now.

1. Walgreens Boots Alliance

Shares of Walgreens Boots Alliance are down by about 62% over the past 12 months. Investors reacted harshly to a dividend reduction the company announced in January from $0.48 per share down to $0.25 per share, and the stock hasn't stopped falling since.

The stock has fallen so low that its reduced quarter dividend payout can produce an eye-popping 11.5% yield for investors who buy at recent prices. With such a high yield, long-term investors could realize market-beating gains if the company can just maintain its payout at its present level.

With more than 8,700 retail locations, Walgreens is one of the world's largest purchasers of prescription drugs. Economies of scale gave the company a strong advantage, but it isn't enough anymore to produce strong profits. Over the past few years, Walgreens Boots Alliance's operating margin has dwindled from reliably positive to disturbingly negative.

These days, pharmacy benefit managers (PBMs) run by just three companies, CVS Health, UnitedHealth Group, and Cigna, process nearly 80% of all U.S. prescriptions. These three PBMs are vertically integrated with their own retail, specialty, and mail order pharmacies. Without a big PBM of its own, Walgreens' pharmacy operation is unlikely to become a reliable source of profits again.

A declining retail pharmacy business isn't Walgreens' only problem. An attempt to become a leading provider of primary care services has been a disaster. Earlier this year, the company's joint venture with Cigna, VillageMD, recorded a $12.4 billion impairment charge.

Walgreens stock might seem like a bargain at a recent price of about 4.6 times forward-looking earnings expectations. Without a clear plan to combat the powerful PBM industry, though, earnings and its dividend payout will likely continue declining. It's probably best to avoid this falling knife until it has a plan to address challenges facing all retail pharmacies not integrated with the big three PBMs.