Three Dividend Stocks Near Multi-Year Lows Worth Considering
Investing in quality dividend stocks at multi-year lows can be a strategic choice, particularly for long-term investors. When a company’s stock price decreases but the dividend stays intact, the yield increases. This situation holds true for the companies detailed here.
PepsiCo (NASDAQ: PEP), UnitedHealth Group (NYSE: UNH), and United Parcel Service (NYSE: UPS) have all experienced declines of over 15% in the past year. These stocks are currently trading near their multi-year lows, with yields well above the S&P 500 average of 1.4%.
Investment Insights on Current Opportunities
This article explores why these three stocks may become worthwhile investments despite the current bearish sentiments about their businesses.
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1. PepsiCo: 4.1% Yield
PepsiCo, a leading beverage and snack company, has seen its stock drop by 25% over the last year. Its sales declined by about 2% in the first quarter of this year, leading to investor concerns about future demand for snacks, especially with the rise of GLP-1 weight-loss treatments.
Despite this, the company achieved an organic growth of over 1% in the same quarter, primarily impacted by foreign exchange rates. While sales growth remains sluggish, it doesn’t indicate a looming crisis for the company. Many consumers are opting for private label brands to save money amid economic pressures. Although price hikes have affected revenues, PepsiCo’s strong brand portfolio suggests a potential recovery.
Over the last 12 months, PepsiCo generated $7.3 billion in free cash flow, matching its dividend payments in that period. While challenges persist, the dividend payout appears secure. Currently, with its stock trading at levels not seen since 2021 and a P/E ratio below 20, it may represent a value opportunity.
2. UnitedHealth Group: 2.1% Yield
UnitedHealth Group, a top health insurance provider, is also trading near a four-year low due to rising costs affecting profitability. The company’s recent quarter revealed increased care activity within its Medicare Advantage business, but management believes these challenges are “highly addressable” and expects to return to its growth target of 13% to 16%.
Notably, in the first quarter, adjusted earnings per share increased by 4% year over year. With rising senior populations, UnitedHealth is positioned for long-term customer growth. Boasting a modest payout ratio of 35%, the risk of dividend cuts appears low.
UnitedHealth’s stock trades at 17 times trailing earnings, presenting a bargain compared to its five-year average P/E of nearly 20.
3. United Parcel Service: 6.8% Yield
Concerns over a potential recession and decreased spending have affected United Parcel Service (UPS), causing its stock to hover near a 52-week low, levels not seen in nearly five years. In its latest quarter, UPS reported $21.5 billion in revenue, slightly down from $21.7 billion the previous year. The company plans to cut 20,000 jobs and reduce deliveries to Amazon as part of efforts to improve margins amidst challenging economic conditions.
While these steps may dissuade growth investors, focusing on profit enhancements can benefit income investors seeking safe dividends, especially with UPS’s current yield nearing 7%. The company’s latest diluted earnings per share were $1.40, below the dividend rate of $1.64. However, effective cost management may stabilize the dividend, despite inherent risks.
Conclusion: Evaluating Investment Potential
Before investing in PepsiCo, consider this:
The Motley Fool analyst team has identified what they believe are the 10 best stocks for investors right now, with PepsiCo not making the cut. The selected stocks could yield substantial returns in the future.
For example, if you had invested $1,000 in Netflix on December 17, 2004, your investment would now be valued at approximately $613,546.* Similarly, investing $1,000 in Nvidia on April 15, 2005, would have resulted in around $695,897.*
*Stock Advisor returns as of May 5, 2025.
The views expressed here are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
