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2 Magnificent S&p 500 Dividend Stocks Down Over 39% To Buy And Hold Forever
The market indices all hit new highs in 2024, but some top consumer brands didn't fare as well and saw their share prices tumble to new lows.
For income investors, this is a great time to buy shares of quality dividend stocks that are offering their highest yields in years. Here are two discounted dividend stocks to buy for the long term.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
1. Nike
Nike (NYSE: NKE) has a long history of delivering excellent returns to investors. The athletic wear market has grown for a long time. Statista expects it will reach $451 billion in 2028. As the top brand with $49 billion in annual revenue, Nike's recent dip could undervalue the company's future opportunities.
Nike is navigating a difficult economy right now. Revenue fell 8% year over year in the most recent quarter. Smaller brands like Lululemon and On Holding are growing faster, but their growth has also slowed over the last year as people remain cautious in spending.
One advantage Nike has, and the reason it can return to growth, is that it benefits from massive scale. The company's deals with top athletes are a key sales driver. Nike also spends close to 10% of its revenue on demand creation expense. That's over $4 billion per year that has helped build an iconic brand that is recognized globally, with most of Nike's revenue coming from international markets.
Despite weak demand trends, Nike generated $4.9 billion in net income over the last year. It paid out 34% of its earnings per share in dividends, which provides ample room for the company to keep growing its dividend over the long term. It just raised the quarterly dividend by 8% to $0.40, bringing the forward yield to 2.19% at the time of this writing. This sends a positive signal to investors that management sees plenty of opportunities for the business to keep growing.
Nike's innovation, marketing, and partnerships with athletes and retailers make the stock a solid investment, especially with the stock down 59% off its previous high. Nike recently hired former company veteran Elliott Hill as its new CEO. Hill previously worked at Nike for 32 years and has a lot of passion for the brand. The hire is a catalyst for a turnaround over the next few years, which is why the stock could be a timely buy right now.
2. Hershey
Hershey (NYSE: HSY) owns several top chocolate and snack food brands that give the business a competitive advantage. Beyond its namesake chocolate brand, it owns Jolly Rancher, Reese's, Twizzlers, and Skinny Pop, among others. But historically high cocoa prices are causing higher retail prices and lower demand, which has sent the stock down 39% from its previous peak.
In the third quarter, the company's adjusted sales were down 1% year over year, while adjusted earnings fell 10%. It was an unusually bad year for this iconic chocolate brand that has delivered profitable sales growth for decades.
Wall Street has soured on the stock because of the spike in cocoa prices and the challenging consumer environment. But the good news is that Hershey is still reporting a profit. It reported nearly $1.8 billion in net income on $10.8 billion in revenue over the last four quarters. The company paid out 59% of its earnings in dividends over the last year, bringing its dividend yield to 3.29%. The lower share price has brought the yield up to its highest level in over a decade, which may signal that the shares are undervalued.
Hershey will likely return to growth as soon as cocoa prices come down, and that's a good bet for long-term investors. Extreme swings in the commodities markets have a way of correcting themselves over time. Higher commodity prices create an incentive for producers to boost supply, which can drive the price back down. Lower sales of chocolate amid rising retail prices can also serve as a price-correcting mechanism, as demand falls, forcing cocoa producers to lower prices.
As a leading brand in a growing confectionery market, Hershey should be worth more in 10 years than it is today. It has paid a growing dividend since 1972, which spans several episodes of higher cocoa prices and economic recessions. This is a great opportunity to buy shares of this top dividend stock while it's on sale.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,307!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,963!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $471,880!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of January 6, 2025
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey, Lululemon Athletica, and Nike. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
