There's a fine line between a company working through adversity and a business in permanent decline. Long-term investing often involves distinguishing between the two.
One clue investors can look to is a company's dividend track record. Companies that consistently raise their dividends often have sturdy business models and an ability to navigate adversity, whether that be recessions or recovering from mistakes.
It's not ironclad, but it's a good starting point. Below are three blue-chip dividend stocks working through issues that have weighed on their respective share prices.
Here is why each one could be a smart buy today. The best part? You can invest in all three companies for just $150, making them suitable for almost any investor's budget.
Image source: The Motley Fool.
1. Realty Income
Real estate is a timeless investment. Realty Income (O 0.82%) is one of the largest real estate investment trusts (REITs), a company that acquires and leases properties and distributes its earnings to shareholders as dividends. The company is famous among investors for its monthly dividend schedule. It specializes in net leases on retail properties, such as stores, restaurants, and other consumer-facing businesses.
Since REITs such as Realty Income must distribute at least 90% of their earnings to investors, the company relies on borrowing money to fund property acquisitions. Higher interest rates have increased borrowing costs in recent years, and the company's profits, reported as funds from operations (FFO) per share, have declined.
However, things appear to be on the mend. Management raised the company's 2025 FFO guidance to $4.24 to $4.28, pricing the stock at under 14 times FFO, a low valuation for one of the industry's most highly regarded REITs. Realty Income has raised its dividend for 32 consecutive years, and there's no apparent reason to believe the company can't extend that streak. The beaten-down share price has lifted the stock's dividend yield to a generous 5.5%.
2. Nike
Sporting apparel giant Nike (NKE 3.31%) has experienced a multi-year decline since the stock peaked in late 2021. The company has made some poor business decisions in recent years, which opened the door for smaller competing brands to gain a foothold with consumers. Nike shook up its leadership team earlier this year, including the return of a former executive as the company's new CEO.
New CEO Elliott Hill is prioritizing product innovation and mending relationships with wholesalers that the company fractured under the previous CEO. Time will tell whether the shake-up will bring Nike back to growth, but at the very least, it seems too early to write off what is still the sporting apparel leader by a wide margin.
Nike has raised its dividend for 23 consecutive years, and it seems unlikely that this streak will end anytime soon. The company's balance sheet is clean, with $8.5 billion in cash, providing a financial safety net to support the company and its dividend throughout its turnaround efforts. Meanwhile, the pessimism has the stock trading at nearly its lowest price-to-book value ratio since 2017.
3. Brown-Forman
Spirits maker Brown-Forman (BF.B -1.06%) (BF.A -0.48%) is known far and wide for its Jack Daniel's brand of American whiskey. The stock has traded at an average price-to-earnings (P/E) ratio of 32 over the past decade, primarily due to the popularity of Jack Daniel's and the company's high profit margins. Today, the stock trades at only 15 times earnings.
Why? Revenue has declined since 2024 due to a range of reasons, including some brand divestitures, weaker consumer spending, lower distributor inventories, and tariffs. Some studies have shown that Americans are turning away from alcohol altogether, with consumption at multi-decade lows. That said, the data shows strength in spirits and ready-to-drink sales, with declines primarily occurring in beer and wine.
Brown-Forman appears likely to navigate these headwinds. The company spent years shifting its focus to move upmarket. In other words, it targets premium spirits customers, who don't necessarily drink as often, but aren't as concerned with prices. In the meantime, Brown-Forman has raised its dividend for 40 consecutive years, and its profits still easily cover the dividend payment. Investors could eventually look back on Brown-Forman's deeply discounted valuation as a no-brainer buying opportunity in hindsight.
