Two Outstanding S&P 500 Dividend Stocks Suffering a Decline of Over 39%, Positioned as Long-Term Investment Opportunities
In 2024, the market indices soared to all-time highs, but not every top consumer brand was able to ride the wave and maintained their value. This is a golden opportunity for income investors to acquire shares of top dividend stocks, offering their highest yields in years. Here are two such discounted stocks to consider for the long term.
1. Nike
One of the long-standing winners in the athletic wear market, Nike (NKE) has delivered solid returns to its shareholders. Although the market size is expected to expand significantly, reaching a whopping $451 billion by 2028, Nike's recent setback might present an excellent buying opportunity.
Despite dealing with a challenging economy, the company managed to generate $4.9 billion in net income over the past year. Nike also paid out 34% of its EPS in dividends, which leaves plenty of room for the company to grow its dividend in the years to come. In fact, it recently boosted the quarterly payout by 8% to $0.40, bringing the forward yield to a compelling 2.19%.
Why Nike Is a Strong Buy Now
The company has a few compelling advantages that make it an attractive investment:
- Strong Scale: Nike’s massive scale enables it to secure lucrative deals with top athletes, serving as a significant sales driver. Additionally, the company allocated nearly 10% of its revenue toward demand creation expenses, contributing to its globally recognized and iconic brand that generates most of its revenue from international markets.
- Resilience: Nike’s resilience stemmed from its extensive network of retailers and partnerships. This vast distribution network helps the company maintain its market position, even in a challenging economic climate.
- Innovation and Marketing: Nike's continuous innovation in terms of products and marketing strategies make it a strong contender in the competitive athletic wear market.
2. Hershey
Hershey (HSY), the iconic chocolate maker, owns many beloved brands, such as Hershey’s, Jolly Ranchers, Reese’s, Twizzlers, and Skinny Pop. Despite historical high cocoa prices causing retail prices to skyrocket, demand has dropped, which has pushed the stock down by 39% from its peak.
Due to these unfavorable conditions, Hershey’s adjusted sales fell by 1% year over year in the third quarter, while earnings slipped by 10%. However, wall street has soured increasingly on the stock, which may be an excellant opportunity for value-seeking dividend investors, as the stock’s yield reached a multi-year high.
Why Hershey Is a Good Long-Term Investment
- Brand Recognition: With a rich history and iconic brand recognition, Hershey has withstood the test of time. The company’s diversified product line enables it to cater to various market preferences, providing a strong competitive advantage.
- Commodity Market Volatility: Although cocoa price fluctuations can cause fluctuations in demand, history has shown that these markets correct themselves over time. Lower sales, caused by rising retail prices, eventually force a decrease in cocoa prices, allowing companies like Hershey to rebound and grow again.
In conclusion, investing in undervalued dividend stocks like Nike and Hershey can be an excellent strategy for income investors looking for long-term growth prospects. Despite current market challenges, both companies maintain strong brand recognition and resilience through innovation, marketing, and diversification.
The text mentions that in 2024, while market indices reached all-time highs, not all top consumer brands maintained their value. This is an opportunity for income investors to acquire shares of top dividend stocks offering high yields. Two such stocks are discussed, Nike and Hershey.
Nike, a leading athletic wear brand, has delivered strong returns and higher yields despite facing challenges. Its massive scale, resilience, and continuous innovation make it an attractive investment.
Hershey, the chocolate maker, with iconic brands such as Hershey's, Jolly Ranchers, and Reese's, has seen its stock drop due to high cocoa prices and decreased demand. However, its rich history and diversified product line can make it an appealing opportunity for value-seeking dividend investors as its yield reaches a multi-year high.
Statista reported in 2022 that the market size of the athletic wear industry is expected to reach $451 billion by 2028, suggesting potential for growth for undervalued stocks like Nike.
