Considering the rise of food prices in recent years, Tyson Foods (TSN -0.43%) might seem like an obvious pick. However, amid those increases, the stock has struggled to beat the S&P 500 since the beginning of the pandemic. Also, business conditions have turned unfavorable, and the stock now hovers near six-year lows.

Despite those challenges, Tyson's low stock price could attract investors in light of the recession-resistant demand for the proteins this meat stock produces. That value proposition could particularly benefit dividend investors for two reasons.

1. The high (but somewhat risky) dividend yield

If one is looking for a high-yield dividend, Tyson stock looks increasingly like an intriguing choice. Its annual payout of $1.92 per share offers investors a dividend yield of 3.9%. That yield is not only near all-time highs but also more than double the 1.6% yield currently offered by the S&P 500.

Moreover, Tyson's history of dividends goes back decades, but the payout level did not frequently change until 2012 when the company began to approve annual increases. With the payout increase streak now exceeding 10 years, it may have reached the point where investors will expect yearly payout hikes. 

Still, the payout now faces a critical test. In fiscal 2022 (ended Oct. 1, 2022), the $800 million in free cash flow covered the $653 million dividend cost. Nonetheless, this has not been the case so far in the current fiscal year. In the first half of fiscal 2023 (ended April 1), the negative free cash flow of $328 million could not finance the $336 million in dividend costs.

As of the end of fiscal Q2, Tyson is down to $543 million in cash. So it calls into question whether the increases will continue, or will it stand pat (or even slash the dividend) and wait for business conditions and free cash flow to improve?

Even so, considering the decades-long history of payouts and the recession resistance of its products, it will likely not abandon dividends and may even raise cash to continue the streak of increases. Additionally, a pause or even a modest cut would probably still leave its dividend yield well above market averages. 

2. The discounted stock price

While the cash-flow challenges present a significant setback for the company, it seems to play into the hands of investors who want to buy shares now. Since February of last year, the stock is down by about 50%.

Admittedly, business conditions and financials have played a role in the stock price decline. A drought has hit the beef industry, which makes up 35% of its revenue in this fiscal year, a level that exceeds the 33% earned from chicken sales. This has led to rising prices on the consumer end and falling sales for the company. In the first half of fiscal 2023, beef sales fell 7% versus the same period in fiscal 2022. Additionally, the problem will likely worsen in the near term, given that the USDA forecasts a 4% decline in beef production in fiscal 2023.

Moreover, in the first half of fiscal 2023, the cost of sales rose 12%, well over the 1% increase in the company's revenue. This resulted in a net income of $229 million for that time frame, down from almost $2 billion in the year-ago period.

However, its price-to-sales (P/S) ratio of 0.3 is its lowest since 2014. Given the relative stability of sales levels, it arguably reflects Tyson's valuation more accurately than the price-to-earnings (P/E) ratio. That discounted stock price could make now an excellent time to lock in the record dividend yield.

Consider Tyson's dividend

Although Tyson faces some uncertainty ahead, it appears worth the risk for income investors amid an elevated dividend yield and lower stock price.

Indeed, the immediate future looks uncertain due to declining beef production. Still, the payout is more than twice the S&P 500 average. And even if a pause in increases, or even a lower payout (assuming it's not a massive cut) were to occur, it could still pay off for dividend investors.

Moreover, food producers have always had to contend with weather issues, and business conditions for the beef industry will likely recover at some point. That should bolster free cash flows and, by extension, the potential returns on Tyson stock.