Ford, Target, and Pfizer: Discounted Dividend Stocks to Consider

Ford Motor Company (NYSE: F), Target (NYSE: TGT), and Pfizer (NYSE: PFE) share several noteworthy characteristics. They are all part of the S&P 500, each offers a dividend yield exceeding 4%, with two exceeding 5%. Despite the overall market rally, these stocks are trading at least 30% below their 52-week highs.

Being a household name and offering attractive quarterly dividends can have its downsides, especially when these companies are currently out of favor. Let’s explore these three iconic dividend-paying S&P 500 stocks that are available at a discount, potentially providing long-term investment opportunities.

1. Ford

It has been four years since I sold my second Ford Flex, a now-discontinued crossover SUV. Ford’s shares have recently fallen out of favor, trading 31% below last summer’s peak. Investors might say they miss the Ford flex.

Ford, the renowned automaker, is performing better than its stock performance suggests, having lost more than 25% of its value over the past three years. Revenue growth remained positive in the years following the pandemic, but the recent quarterly update showed a decline. Nevertheless, investors found encouraging signs in Ford’s latest earnings report.

The company’s revenue dipped 5% to $40.7 billion in the first quarter, though analysts had anticipated a steeper 16% drop. Wall Street expected a profit of $0.02 per share; Ford exceeded that expectation with earnings of $0.14 per share in the first quarter. Ford’s bottom-line performance has markedly outpaced market forecasts recently, with increases of 3%, 20%, and a remarkable 557% over the last three quarters.

Despite suspending its guidance due to trade war uncertainties, which may impact its earnings by approximately $2.5 billion this year, Ford aims for $1 billion in cost savings to offset this impact. Recently, the company announced a price increase on three vehicle models made in Mexico by up to $2,000. On a brighter note, U.S. automakers became part of potential frameworks for a trade deal with the United Kingdom.

Looking forward, Ford appears to have potential despite current uncertainties. The average age of passenger cars on the road is a record 14 years, indicating strong demand for auto sales. Economic confidence and low financing rates will be crucial for consumer purchases. With a near 6% yield, Ford’s dividend aligns closely with projected free cash flow for the coming years. However, sustaining this level of distribution will depend on the economic climate and tariff developments.

2. Target

The discount retailer Target is experiencing challenges, with sales declining in four of the past seven quarters. The company’s revenue has slightly decreased for two consecutive fiscal years, and the stock has dropped 42% from its high in August.

On a positive note, Target is positioned well for potential economic slowdowns, as it offers essential grocery items that may attract shoppers seeking value. The 4.6% dividend yield is near historical highs and seems secure in the immediate future. Currently, the stock is trading at less than 11 times trailing and forward earnings, which may drop to just 10 times next year’s projected profits.

3. Pfizer

Pfizer’s impressive 7.6% yield might raise some concerns more than excitement. Such a high yield often indicates that key products are losing patent protection, competitors have better alternatives, or the company’s pipeline for new treatments is weak. Analysts predict a gradual decline in revenue over the next five years, with net income expected to follow suit next year.

However, Pfizer has the potential to reverse this trend with new successful treatments, despite recently abandoning a promising weight loss drug candidate. The company could leverage its market position to acquire smaller firms with better growth prospects. While Pfizer’s streak of 16 consecutive dividend increases may be at risk if profits do not recover, the company is far from silent and still has opportunities for growth.

Should you invest $1,000 in Ford Motor Company right now?

Before making an investment in Ford Motor Company, consider this:

The analyst team has identified what they consider the 10 best stocks to buy right now, and Ford is not included. These selections are projected to offer significant returns over the coming years.

Historical performance indicates that investing in the right stocks can yield substantial profits. For instance, had you invested $1,000 in Netflix on December 17, 2004, it would now be worth $617,181. Similarly, a $1,000 investment in Nvidia on April 15, 2005, would have grown to $719,371.

It’s noteworthy that the historical return for the identified best stocks has averaged 909%, significantly outperforming the S&P 500’s 163% gain. Don’t miss the latest top 10 list available for new members.

Rick Munarriz holds positions in Pfizer and Target. The views and opinions expressed herein are those of the author and do not necessarily reflect official positions.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.