Two Outstanding S&P 500 Dividend Stocks Experiencing a Decline of 28% or More, Perfect for Long-Term Investment
The S&P 500 has soared to new heights lately, yet some of the most robust companies that regularly distribute dividends are trading significantly below their highs. As a result, their dividend yields have climbed, potentially indicating they may be undervalued.
Two long-term dividend stocks to consider include:
1. Realty Income
Realty Income (O, 1.99%) is a leading real estate investment trust (REIT) with a 55-year track record of rewarding investors with consistent dividends. As a REIT, it is obligated to dispense at least 90% of its taxable income (excluding capital gains) to shareholders, and it's notable that the company pays dividends on a monthly basis.
What immediately stands out is its half-century-long dividend streak. This demonstrates that Realty Income has successfully navigated several economic downturns through its robust business and diverse tenant portfolio. With more than 15,400 global properties in its portfolio, it boasts some of the industry's top clients, such as FedEx, Wynn Resorts, Walmart, and Home Depot.
Realty Income prioritizes investing in properties that host industries' dominant or emerging players. Management focuses on sustainable cash flow generation, which aids in maintaining dividend distributions for years.
The company continues to spot opportunities in new property investments and aims to expand its business value. Management upgraded its investment volume guidance to $3.5 billion for 2024, and anticipates reporting full-year adjusted funds from operations per share between $4.17 to $4.21, which represents a nearly 5% increase at the midpoint of the range.
Realty Income currently pays a monthly dividend of $0.2635 per share. With the stock trading 28% lower than its recent peak, the forward yield has increased to 5.41%. This presents an excellent opportunity to acquire shares. If interest rates stabilize or decrease, demand for high-yield stocks should grow, potentially pushing Realty Income's share price higher over the next year.
2. Hershey
Hershey (HSY, 0.78%) is the leading confectionery brand and possesses a stable of top-tier snack brands like Skinny Pop. Iconic candies like Reese's, Kit Kat, Jolly Rancher, and Hershey have stood the test of time. However, Wall Street has heavily discounted the company's value due to weaker consumer spending trends. The stock has plunged approximately 35% from its peak.
Despite a challenging consumer spending environment this year, Hershey is projected to achieve full-year revenue growth of 1%, with adjusted earnings expected to dip by 2% to $9.40. Despite this weakness, Hershey continues to distribute a quarterly dividend of $1.37 per share, resulting in a forward yield of 3%.
This is a rare chance to inject a high-quality business into your portfolio. Hershey's dividend yield has only reached 3% a few times during the previous 20 years.
It's likely that people will still maintain their sweet tooth, even decades from now. People will continue to indulge in chocolate. Statista values the confectionary market at $586 billion and is projected to expand at a compound annual growth rate of 5.4% through 2029.
Inflation has negatively impacted both Hershey and its customers, but this will not last forever. When the economy recovers, investors will likely view Hershey's high dividend yield as an attractive buying opportunity from a decade ago.
After considering the potential undervalued dividend stocks, investing in Realty Income and Hershey could be beneficial due to their robust track records and current high dividend yields. Realty Income's forward yield has increased to 5.41% with the stock trading 28% lower than its recent peak, indicating a potential investment opportunity. Similarly, Hershey's dividend yield of 3% is quite rare and presents a high-quality business opportunity, especially considering the projected growth of the confectionery market. In the context of finance and investing, these opportunities could be advantageous for those seeking long-term dividend growth.
