Why Now Could be the Perfect Time to Buy These 2 Dividend Stocks
As seasoned investors know, the stock market can be unpredictable. However, one strategy to weather the storm is holding onto dividend-paying companies that exhibit strong potential for future growth. Here are two stalwarts currently down over 40% from their highs, offering some of the most attractive yields we've seen in a while.
1. Nike (NYSE: NKE)
Nike has been a staple in the athletic industry for decades, and despite its recent struggles, it remains a solid long-term investment. The company's stock took a significant hit recently, dropping 51% from its peak, primarily due to weak revenue performances. However, the recent announcement of a leadership change has provided a glimmer of hope.
Leadership Shakeup: A Positive Catalyst
Nike announced that Elliott Hill, a longtime company veteran, would take over as President and CEO starting October 14. Hill's prior role as Nike's President of Consumer and Marketplace could be a crucial factor in driving the company's turnaround. In his last position, he was instrumental in expanding Nike's global presence.
Though Nike's revenue dropped 2% year over year in the most recent quarter, categories like basketball and fitness showed promise. Hill's strategy, once revealed, could focus on bolstering these high-growth segments, potentially turning the tide for the company.
Dividend Payouts: A Consistent Performer
Despite its recent challenges, Nike has managed to increase its dividend for 22 consecutive years. The company paid out 38% of its earnings last year, resulting in a forward dividend yield of 1.70%, surpassing the S&P 500’s average of 1.26%. As Hill settles into his new role, investors can expect strategic moves that enhance performance and stabilize the stock price.
2. UPS (NYSE: UPS)
Another robust dividend payer, UPS, has faced its share of challenges but remains a strong candidate for long-term investors. With the stock trading 45% below its previous high, it offers an attractive entry point for those looking to capitalize on its high dividend yield.
Competitive Pressures and Strategic Moves
The shipping giant reported a slight dip in revenue and a 30% year-over-year decline in operating profit for the second quarter. Yet, these struggles are reflected in the current stock price, offering a potentially lucrative opportunity for patient investors.
Dividend Consistency
UPS has been paying dividends for 25 years, demonstrating consistent financial performance amidst market fluctuations. The management projects a $5.8 billion free cash flow for the year, which comfortably covers the $5.4 billion planned dividend payout. The current quarterly dividend stands at $1.63 per share, yielding an impressive forward dividend yield of 5.05%.
Signs of Recovery
Recent reports indicate an uptick in U.S. volume growth, the first in over two years, driven by new e-commerce clients. Additionally, UPS's acquisition of Estafeta in Mexico positions it for future growth as more customers bring distribution closer to the U.S. This strategic move highlights UPS's long-term potential despite short-term hurdles.
Conclusion
Investors looking to buy the dip in high-quality dividend stocks should consider these industry leaders. Both Nike and UPS offer compelling dividend yields and the potential for stock price recovery, making them attractive options for those willing to take a long-term view. By investing in these companies now, you position yourself to benefit from their growth and consistent dividend payouts.
