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4 High-Yield Dividend Stocks Worth the Risk

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Conventional wisdom holds that the higher a stock’s dividend yield, the riskier the investment. In fact, a fat yield is sometimes a sign of big problems. Because a stock’s yield is calculated by dividing the annual dividend by the share price, the yield goes up when the stock falls (assuming that the payout remains constant or rises). So an ultra-high yield is often investors’ way of saying that they don’t think the dividend rate is sustainable.

But with interest rates scraping bottom, high-yielding stocks can be welcome additions for income-starved investors. So we went on a mission to find good stocks with high yields and reliable dividends. We searched for companies with the financial strength to maintain their payouts, as well as fair prospects for boosting sales and profits (maybe not right away, but within a few years). Our four picks aren’t steady-Eddie blue chips, so tread carefully.

Two of the firms we highlight, HSBC Holdings and Las Vegas Sands, pay “qualified” dividends, meaning those payouts get preferential tax treatment—a federal tax rate of 15% for most people. The other companies we highlight pay dividends that are not qualified, so payouts are treated as ordinary income.

All prices and returns are through August 16. Price-earnings ratios are based on estimated earnings over the next four quarters, except where noted.

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