The S&P500 is at a record high. However, not all stocks in the widely followed index are setting records. Quite a few S&P 500 stocks are nowhere near their peaks.
However, that doesn’t mean some of them aren’t great choices. Here are three great S&P 500 dividend stocks that are down 35% or more that you can buy and hold forever.
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Shares of oil and gas producer Western petroleum (NYSE:OXY) are about 47% below the high at the end of 2022. The stock is among the biggest losers on the S&P 500 this year.
But is Occidental a stock you can buy and hold forever? Warren Buffett thinks so. He wrote to Berkshire Hathaway shareholders earlier this year that Oxy was one of a few select stocks he planned to own “indefinitely.”
Buffett knows how important American oil production is to the country’s security and economic strength. He also knows that Occidental Petroleum has “vast oil and gas reserves” in the US and is a leader in carbon capture and storage (CCUS).
Granted, Occidental Petroleum doesn’t pay an overwhelming dividend. The future dividend yield is only 1.85%. However, this oil stock should deliver solid total returns over the long term, especially if the CCUS initiatives realize their potential.
Pfizer (NYSE:PFE) reached its highest stock price at the end of 2021 thanks to skyrocketing sales of its COVID-19 products. Major pharmaceutical stocks have since fallen nearly 60% as sales fell. Pfizer also faces uncertainty as several best-selling products lose patent exclusivity over the next five years.
The sharp decline has led to two positive side effects. First, Pfizer’s forward dividend yield is now an ultra-high 6.5%. Second, the shares are cheap. The shares trade at a price-to-earnings ratio of just 8.6. By comparison, the average expected earnings multiple of the healthcare sector in the S&P 500 is 18.3.
Moreover, the prospects for Pfizer are not as bleak as they seem. The company has used its COVID-19 cash stockpile to make multiple acquisitions. These deals added drugs to Pfizer’s lineup and candidates to its pipeline that should drive growth over the next decade and beyond.
More importantly, Pfizer has the resources and expertise to continue to make smart investments in internal research, development and acquisitions in the future. This drug manufacturer has survived and thrived since 1949. I predict Pfizer will remain a pharmaceutical winner for a long time to come.
United Parcel Service (NYSE:UPS) The stock is about 46% below its highs seen in early 2022. Like Pfizer, the package delivery company benefited from the COVID-19 pandemic. However, instead of selling vaccines and antiviral therapies, UPS delivered record numbers of packages as many people in the US and other countries were stuck at home.
Shipping volumes have fallen in recent years as the effects of the pandemic have subsided. UPS also faced the threat of a Teamsters Union strike in 2023. The strike was averted when the company signed a five-year deal with higher costs weighing heavily on UPS’s revenues.
However, UPS could be poised for a solid recovery. The company has seen two quarters in a row of U.S. shipping volume growth. The brunt of the higher costs associated with the Teamsters contract is already being felt. UPS is also focusing on more profitable areas, including healthcare logistics and meeting the shipping needs of small to medium businesses.
Income investors should find UPS particularly attractive. The company’s future dividend yield is 5.2%. UPS has increased its dividend for fifteen years in a row. I expect it to continue this trend with another dividend increase in the near future.
Consider the following before purchasing shares in Occidental Petroleum:
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Keith Speights holds positions at Berkshire Hathaway, Pfizer and United Parcel Service. The Motley Fool holds and recommends positions in Berkshire Hathaway and Pfizer. The Motley Fool recommends Occidental Petroleum and United Parcel Service. The Motley Fool has a disclosure policy.
3 Great S&P 500 Dividend Stocks Down 35% to Buy and Hold Forever originally published by The Motley Fool
