Buying a top dividend stock when it's near its 52-week low can be an excellent move for long-term investors to consider. That's because it gives you the potential to benefit from a higher-than-usual yield, plus the possibility to cash in at a higher valuation in the future, assuming that the struggling stock bounces back.
While not every stock will be a good buy in the long run, companies that routinely pay and increase their dividend payments will usually have solid financials, and that can make them good investments to hold.
Three stocks that may be ideal for income-seeking investors right now are Target (TGT +3.11%), PepsiCo (PEP 0.45%), and Stanley Black & Decker (SWK +4.26%). These aren't just your regular dividend stocks -- they are Dividend Kings, which means they have been raising their payouts for at least 50-plus years. And with their low valuations, they can be solid buys today.
Here's a look at why they are struggling and why they're worth adding to your portfolio.
NYSE: TGT
Key Data Points
1. Target
Big-box retailer Target has been struggling in recent years, as consumers cut back on discretionary spending amid rising inflation. The company experienced a decline in sales for two straight fiscal years. For the year ending Feb. 1, the company's top line fell by less than 1% to less than $107 billion.
The good news is that with its profits still remaining strong, Target stock's payout ratio is around 50%, leaving plenty of room for this Dividend King to continue raising its dividend. Target stock yields 4.3% today, and the company increased its quarterly payment by 70% in five years. It has increased its dividend for 53 straight years, and more increases could be coming, even despite the sluggish top line.
Target's stock is up just 2% over the past five years, and while it's a cheap stock, trading at 12 times trailing earnings and a few dollars from its 52-week low of $103.46, it may be a while before it starts to rally. Until consumer sentiment improves and discretionary spending rises, returns from the stock may be underwhelming. But as long as you're willing to be patient, this can be a solid investment to buy and hold.
NASDAQ: PEP
Key Data Points
2. PepsiCo
Beverage and snack company PepsiCo also has a dividend growth streak spanning 53 years. It raised its payout earlier this year, by 7%. Investors who buy the stock today are securing a yield of 3.7%. While that's lower than Target's, it's still more than double the S&P 500 (^GSPC +1.20%) average of 1.4%.
The company has also been struggling with growth, as in 2024, the PepsiCo's sales totaled $91.9 billion, flat from the previous year. There are concerns that the rising popularity of GLP-1 weight loss drugs is impacting sales, as these medications can help people suppress their appetites. While management doesn't concede that GLP-1 drugs are directly hurting sales, it does acknowledge consumers are looking for healthier options, and the company is adapting accordingly. This week, PepsiCo announced plans to buy Poppi, a prebiotic soda brand, for $2 billion.
Shares of PepsiCo are down 8% in the past 12 months, and with the stock trading near its 52-week low of $141.51 and 22 times its trailing earnings, now could be an optimal time for investors to buy it.
NYSE: SWK
Key Data Points
3. Stanley Black & Decker
The longest streak of dividend increases on this list belongs to Stanley Black & Decker. It has increased its dividend for an impressive 57 consecutive years. And it boasts that at 515 quarters, its "quarterly dividend record is the longest of any industrial company listed on the New York Stock Exchange." The yield today sits at more than 4%, making this yet another appealing option for income investors to consider.
The company is a provider of industrial tools and hardware. Unfortunately, with consumers looking to cut spending amid worsening economic conditions, delaying repairs, maintenance, and home renovation projects can be one way for people to reduce their spending this year.
Stanley's sales have fallen for two straight years, as it faces similar challenges to that of Target. Stanley is working on cutting costs, improving margins, and reducing debt load, which should make it a more attractive option for risk-averse investors; the company's long-term debt totaled $5.6 billion as of the end of the year.
With a strong name and track record for success, Stanley may be a good stock to buy and hold. Its trailing earnings multiple looks high at 43, as it incurred both restructuring and impairment charges over the past year. But based on analyst estimates, its forward price-to-earnings multiple is only 15. While many investors are down on the stock today, it's just a few dollars away from its 52-week low of $77.70 and can be an underrated investment to hang on to for the long haul.
