Three Outstanding S&P 500 Dividend Stocks Experiencing a 22-58% Decline, Ideal for Long-Term Investment and Holding Indefinitely
In today's competitive business landscape, it's rare for companies to maintain their dominance for extended periods. Yet, a handful of heavyweights have managed to endure the relentless pressure of global competition. Among these, Nike, Hershey, and PepsiCo have stood the test of time, boasting beloved brands and the pricing power they offer.
However, even giants like these aren't immune to adversity. As enduring as they might be, they have all experienced declines, with losses ranging from 22% to 58% from their peak prices. Currently, they're grappling with issues such as poor execution, political risks, and even environmental challenges that have cast doubt over their future prospects.
Let's delve deeper into each of these legendary brands and examine why they present excellent buy opportunities for dividend investors.
1. Nike's Turnaround Journey
Iconic for its collaborations with legendary athletes like Michael Jordan and Cristiano Ronaldo, Nike has built a powerful brand. Sadly, the company's once-credible leadership made a series of missteps. Its former CEO prioritized direct-to-consumer sales, heavily investing in online channels while neglecting wholesaler relationships and product innovation.
As a result, Nike's sales momentum has waned, and smaller competitors like Hoka and On have gained ground in the running shoe market. In response, the company brought back former CEO Elliott Hill to revitalize the business formula that once propelled Nike to the top.
Despite the challenges, Nike's solid financials remain a firm foundation. The company boasts a higher cash balance than debt and a dividend yielding over 2%, the second time since the 1980s. Moreover, Nike's management has consistently increased its dividend for 23 consecutive years, with a reasonable payout ratio of only 64% of estimated earnings. Furthermore, Nike continues to reign as a cultural pillar, securing lucrative licensing deals with sports leagues globally. A return to growth for Nike would surely yield rewards for patient investors.
2. Hershey's Sweet Troubles
The world's cocoa supply chain has been hit hard by challenges, including crop diseases and bouts of adverse weather. These events have put a significant strain on West Africa, the world's largest cocoa producer. As a result, the price of cocoa has soared, forcing Hershey to raise its prices in an attempt to compensate. While this move might increase Hershey's bottom line, it could also discourage price-sensitive consumers in this tough economic climate.
Experts predict the cocoa shortage may persist through 2025, posing a major challenge to Hershey. The company has yet to discuss its plans for 2025, and rumors have surfaced that it is considering purchasing large quantities of cocoa through futures contracts to mitigate its dependence on the volatile market.
Despite the difficulties, Hershey's financials remain strong. Its dividend payout remains well-funded, with a 60% payout ratio, and its 3.6% yield is nearing an all-time high. In the face of uncontrollable hurdles, this resilient company is an enticing buy for dividend investors.
3. PepsiCo's Challenge: Navigating Health and Political Headwinds
The junk food and soda industry has been facing scrutiny, as consumers turn towards healthier alternatives and anti-sugar advocates like Robert F. Kennedy Jr. push for policy changes. Despite the uncertain future, PepsiCo's CEO has reassured investors, addressing concerns about the company's commitment to reducing sugar, fats, and artificial colors in its products. Plus, PepsiCo has expanded its offerings to cater to changing consumer preferences, including zero-sugar sodas and healthier snack options.
Analysts estimate that PepsiCo's earnings will grow by an average of 6% annually over the next three to five years. The market’s skepticism has driven the stock's dividend yield up to 3.6%, the highest it's ever been. PepsiCo is a proven Dividend King with a reasonable payout ratio, making it an attractive buy for investors looking to capitalize on its historically high yield.
In conclusion, even the most successful companies can face challenges. But Nike, Hershey, and PepsiCo are divine examples that, even in the face of adversity, they remain strong candidates for dividend investors. By adapting to market conditions and maintaining a commitment to strategic growth, these iconic companies will surely continue to produce reasonable returns for their investors.
- To further bolster Nike's financial position and attract investors, the company could explore opportunities in finance and investing, such as exploring different investment strategies to diversify its portfolio and potentially increase its cash reserves.
- Hershey's current financial strength, coupled with its resilience in the face of cocoa challenges, makes it an appealing candidate for intelligent investors looking to explore finance and investing opportunities in the company. They could consider various financing options, such as issuing bonds or seeking external investment, to further bolster Hershey's financial strength and ensure its continued success in the face of market volatility.
