There are a few things that United Parcel Service (NYSE: UPS), Walt Disney (NYSE: DIS)And Ford Motor Company (NYSE: F) have in common. They are Wall Street giants, parts of the S&P 500The stocks all pay dividends, with two of the three currently yielding more than 5%.
They’re also out of favor. UPS, Disney, and Ford are trading 22%, 28%, and 29% below their 52-week highs, respectively. Stretch the timeline, and the three stocks are trading 45% to 60% below their all-time highs set in 2021 or 2022. That’s not a problem. It’s an opportunity. Let’s take a look at why these are three great dividend-paying S&P 500 stocks to hold for the long term.
1. United Parcel Service
Brown has been more black and blue lately. The package delivery and supply chain solutions provider saw revenue fall 9% last year to $91 billion. Profitability took an even bigger hit.
The near-term challenges are real. The signing of a five-year contract with the UPS Teamsters union last summer locks in staffing levels through mid-2028, but it comes at the cost of a margin-eating spike in labor costs over the past year. The increases will continue over the next four years, but they will be more manageable.
It’s no fun when an income statement burns at both ends, and it can be especially problematic for income investors. UPS has raised its quarterly dividends for 15 years in a row. The rising dividends and falling stock price have the stock now yielding 5%. Is this sustainable if business continues to shrink while expenses continue to rise?
This doesn’t have to be an accordion of cacophony. UPS rolled out layoffs earlier this week after a much larger wave of layoffs earlier this year. Analysts expect a return to revenue growth in the second half of this year, followed by a rebound in profits in 2025. If they’re right, UPS still has some wiggle room to continue its streak of dividend increases. You can also buy UPS for a reasonable 14 times next year’s expected earnings.
2. Disney
Another household name with an attractively low share price is Disney. The media stock is down for the sixth straight month. You can buy Disney for less than 19 times expected earnings.
There are a lot of things going right for the company, despite the stock moving in the opposite direction. Disney returned to box office dominance this summer with the world’s top two highest-grossing movies of 2024, and it has two films coming out this holiday season that should do even better. Disney+ is finally profitable. There are some short-term issues at its theme parks and a longer-term problem with its legacy media networks, but the sum of all these mouse parts points to healthy growth for the foreseeable future.
Disney’s current yield of 1% is much lower than the other names on this list, but the entertainment bellwether increased its semi-annual distributions by 50% earlier this year. The bullish play here will still come in the form of capital appreciation rather than dividend checks.
3. Ford
The highest yield and lowest earnings multiple on the list belongs to Ford, but let’s start with a brake check. Growth has slowed to single-digit increases for the automaker for three consecutive quarters. Trading at a price-to-earnings ratio of 11 sounds great until you realize that’s based on a market cap of $42 billion. Ford’s enterprise value is $168 billion when you factor in its debt.
The auto market is cyclical, and Ford is struggling to find the right balance between its electric vehicles and its more traditional rides. The current yield of 5.7% will reward patient investors, but the big spending depends on Ford getting back on the gas pedal and keeping costs in check. Analysts expect flat sales and profit growth for Ford next year, and we know how drivers feel about flats. The optimistic catalyst here is that falling interest rates could spark renewed interest in big purchases. Not ready for a new car? Ford is hoping you’ll turn to the iconic automaker.
Should You Invest $1,000 in United Parcel Service Now?
Before you buy United Parcel Service stock, you should consider the following:
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Rick Munarriz has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
3 Awesome S&P 500 Dividend Stocks Down 45% to Buy and Hold Forever was originally published by The Motley Fool
