For income investors, sometimes the best combination is finding stocks that are oversold and that also offer dividends. Not only are dividends a great way to grow wealth in the long term, the reliable income can help investors while they wait for stocks to recover. Here are two stocks that largely underperformed S&P500 over the past three years, but offering stable long-term business operations and respectable dividend yields.
Boost your portfolio
McCormick (NYSE: MKC) is a global leader in flavor, spices and herbs, with two segments that generate more than $6.5 billion in annual sales in 150 countries and territories. It boasts a long list of name brands with leading stock positions in many markets.
Just this week, McCormick announced a quarterly dividend of $0.42 per share, marking the spice company’s 100th year of consecutive dividend payments. The dividend yield is currently a respectable 2%.
One of the company’s growth drivers comes from management’s Comprehensive Continuous Improvement (CCI) savings program, which contributed to a 60 basis point improvement in gross margins in the second quarter compared to the previous year. Management expects the trend to continue with higher gross margins in the second half of 2024, compared to the first half.
Management is also focusing innovation on specific higher-growth product opportunities, which should help reverse slowing sales volume overall. It is also true that McCormick’s divestiture of a small canning company is currently weighing on sales results.
As management focuses on higher growth opportunities while improving gross margins with its CCI program, the company has proven that it will continue to return value to shareholders as they wait for the stock price to gain strength in the future.
Household name
While investors may not recognize or follow this Stanley Black & Decker (NYSE: SWK) stock, chances are it’s still a household name for you. The company is a global leader in tools and outdoor products and operates manufacturing facilities worldwide. Stanley Black & Decker owns an impressive list of other brands, including DeWalt and Craftsman, among others.
Stanley Black & Decker is in a similar position to McCormick as the company works hard to reduce its cost structure and increase margins. The good news is that significant progress has been made: second quarter gross margins increased 28.4%, or 600 basis points higher than last year.
As Stanley Black & Decker uses these cost savings to fuel the growth of its powerful brands, it is also reducing its debt burden. The company’s cost savings and strong cash flow generation during the second quarter supported a $1.2 billion debt reduction. Investors shouldn’t forget the respectable 3% dividend yield.
As the company continues to cut costs and reinvest in high-opportunity products and brands, it remains a solid long-term position for income investors. Just look at how consistently Stanley Black & Decker has paid dividends over time.
Buy now
Both companies have lagged the broader S&P 500 over the past three years, but they are working hard to improve operational efficiencies and reduce costs. Both companies own a roster of great brands that can and will drive growth again with innovation and reinvestment. It will take some time for their shares to regain traction in the market, but they are positioned to rebound in the coming years – and provide respectable dividend yields while investors wait.
Should You Invest $1,000 in Stanley Black & Decker Now?
Consider the following before buying shares in Stanley Black & Decker:
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool recommends McCormick. The Motley Fool has a disclosure policy.
2 Overlooked and Unloved Dividend Stocks to Buy and Hold Forever was originally published by The Motley Fool
