High-yield dividend stocks (those with yields above 4%) have a mixed reputation among investors. On one hand, they offer attractive cash distributions that can be reinvested to take advantage of the power of compounding. On the other hand, an unusually high yield may signal underlying issues with the company's fundamentals, such as declining earnings, cash flow, or growth prospects.

However, this does not mean that high-yielding stocks should be avoided altogether. They can still play a valuable role in a diversified and long-term portfolio, especially if the cash distribution is reinvested over a 10- to 20-year period. This approach can build a solid cushion against possible share-price declines when the dividend is eventually repurposed as a passive income stream.

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Source Fool.com