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3 Dow Jones Dividend Stocks That Are Within 6% of Their 52-Week Lows to Buy Now

Despite the recent market turbulence, it has been a good year overall for the stock market. But the Dow Jones Industrial Average is up just 2.4% year to date (YTD) – lagging the Nasdaq Composite‘s nearly 7% YTD return and the S&P500‘s almost 8% gain.

The Dow Jones contains many leading blue chip companies. However, there are plenty of Dow stocks that have fallen in value this year, and some particularly big names that are within 6% of their 52-week lows, including Apple (NASDAQ: AAPL), Nike (NYSE:NKE)And United Health (NYSE:UNH). Here’s why all three dividend stocks have fallen, but why they may be worth buying now.

A person smiling while running with wireless earbuds.

Image source: Getty Images.

From sector leader to sector underperformer

Apple is perhaps the most surprising stock on this list. It makes up more than 7% of the Nasdaq Composite. And despite Apple putting pressure on the index, the Nasdaq Composite reached a record high on March 21 and is still up significantly this year. Investors are used to Apple leading the market and not lagging behind.

The underperformance is even more drastic when we look at the technology sector. Apple accounts for 19.2% of total sales Technology Select Sector SPDR Fund, an exchange-traded fund that reflects the performance of the technology sector. Yet the share has remained virtually stable over the past year, while the sector has risen more than 35%.

^ IXT diagram^ IXT diagram

^ IXT diagram

It would be one thing if Apple were simply part of a broader sell-off of the Nasdaq and the technology sector. But any time you see an industry leader moving in the opposite direction of its peer, it’s usually a sign that investors have specific concerns about a company.

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For Apple, the concerns are largely justified. The growth just isn’t there. Sales in Apple’s second most important market – China – are declining. Apple’s lack of monetization with artificial intelligence (AI), and frankly innovation in general, looks bad compared to other big tech stocks like Microsoft And Nvidia that use AI as a spring for growth over several decades.

Apple appears to be out of step, so it’s hard to blame investors for hitting the sell button. To make matters worse, the Justice Department has filed a civil antitrust lawsuit against Apple for monetizing the smartphone markets.

The great thing is that Apple has a price-to-earnings ratio of just 26.1, making it much cheaper than the technology sector’s price-to-earnings ratio of 38.7. Apple generates a lot of cash, which allows the company to buy back shares and increase dividends even during slowing growth.

One look at Apple’s paltry 0.6% dividend yield might lead you to believe that the company has a weak capital return program. In fact, it simply chooses to distribute the vast majority of funds through buybacks, rather than dividends. Apple’s buybacks have been an excellent investment, given the stock’s performance. Buybacks can be particularly effective when a stock is in trouble and the company can step in and buy back shares cheaply.

Leaving Apple out of the equation has been a losing bet in the past. The company’s brand and vertical integration are still strong, so value investors may want to step in now and consider the stock.

It’s time to get past Nike’s temporary profit spike

Despite its underperformance, Apple has still made market gains over the past five years. The same cannot be said about Nike. Despite posting huge gains in 2020 and 2021, Nike’s stock has tumbled and is now at about where it was five years ago.

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AAPL chartAAPL chart

AAPL chart

Nike is a great example of why pegging a stock at a price it probably should never have reached in the first place is bad. During the height of the pandemic, people had limited options to spend on services, so they turned to spending on goods en masse. Nike has benefited enormously from this. However, the growth turned out to be short-lived.

NKE Earnings Chart (TTM).NKE Earnings Chart (TTM).

NKE Earnings Chart (TTM).

As you can see in the chart, Nike’s earnings per share and operating margin initially fell at the onset of the COVID-19 pandemic, but then skyrocketed in 2021 – matching the stock’s all-time high. Turnover has increased, but this is at the expense of lower profits and margins. The company is closer to where it was before the pandemic than it was in 2021, so it’s understandable why the stock price has retreated.

To its credit, Nike has prioritized its capital return program in a context of slowing growth. The company is buying back shares and the dividend has increased 68% in just five years. Granted, the stock only yields 1.6%, but Nike is turning into a worthy dividend candidate, rather than relying purely on growth as in the past.

Like Apple, Nike is one of the most influential brands in the world. Nike now has a price-to-earnings ratio of just 26.2 – lower than the S&P 500’s price-to-earnings ratio of 27.9. The near-term prospects aren’t great, but patient investors have a chance to buy Nike at an attractive price to buy.

Dive into the healthcare sector with UnitedHeatlh

Like Apple, health insurer UnitedHealth has continued to outperform the market over the past five years. But the stock has sold off recently, mainly due to a lower-than-expected increase in payment rates for the 2025 calendar year.

UnitedHealth’s growth is heavily dependent on its Medicare business, so the selloff makes sense. To make matters worse, UnitedHealth also fell victim to a cyberattack, causing the company to fall behind on claims payments.

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Short-term challenges aside, it would be a mistake to underestimate UnitedHealth’s role in healthcare. Medicine is pushing the boundaries of innovation, but insurance is the glue that holds America’s healthcare system together. The sector has grown to become the third largest in the country, behind only financial services and technology.

UnitedHealth is a good choice for investors looking to invest in the healthcare sector, but not through a high-flying drugmaker like Eli Lilly. UnitedHealth is on the weaker side of the healthcare sector and is more focused on moderate growth and increasing its dividend – which has grown 400% over the past decade. It has a price-to-earnings ratio of 19.1, making it a good value for those looking for cheaper stocks to buy now.

Should You Invest $1,000 in Apple Right Now?

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Daniel Foelber has the following options: July 2024 long call at $95 on Nike. The Motley Fool holds positions in and recommends Apple, Microsoft, Nike and Nvidia. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2025 calls of $47.50 on Nike, long January 2026 calls of $395 on Microsoft, and short January 2026 calls of $405 on Microsoft. The Motley Fool has a disclosure policy.

3 Dow Jones Dividend Stocks That Are Within 6% of Their 52-Week Lows to Buy Now was originally published by The Motley Fool

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