2 Magnificent S&P 500 Dividend Stocks Down 2% and 16% to Buy and Hold Forever

For approximately a year up until July 18th, the S&P 500 index has seen an increase of about 13.6%. Yet, it’s important to note that not all stocks have performed equally during this period; some have outperformed, while others have fallen behind.

Over the given period, both recognized brands – Home Depot (HD) and PepsiCo (PEP) – have underperformed, experiencing declines of 1.8% and 15.9%, respectively.

It appears that the market is focusing more on immediate problems, overlooking a business’s lasting advantages. This situation presents a chance for investors, as they might be compensated for their patience. During this period, you could accumulate dividends until the outcomes and share prices improve.

1. Home Depot

A significant number of homeowners and skilled construction workers frequently visit Home Depot. Known as the leading home improvement store, it provides convenience and affordable rates.

Home Depot’s sales may be influenced by economic conditions, particularly the housing market cycle. Factors like mortgage rates, home sales, and job market trends can impact its overall revenue.

At present, due to the increased costs of essentials such as food and housing, many individuals are postponing significant home improvement projects because their disposable income is being eroded. Moreover, higher interest rates have made borrowing for these projects more expensive, leading people to delay or abandon their plans for large renovations.

It appears that the first-quarter same-store sales for Home Depot declined by 0.3%. However, a 0.7% decrease due to currency conversions should also be taken into account. The reporting period concluded on May 4th.

Eventually, homeowners are bound to undertake renovations – whether it’s updating their kitchen or bathroom, it’s only a question of when. And when they do, it appears quite probable that they’ll revisit Home Depot.

During this period, shareholders will receive a dividend return of 2.6%, which is over twice as much as the 1.2% dividend yield offered by the S&P 500.

While we proceed with our plans, shareholders can look forward to a dividend rate of 2.6%, which is more than double the 1.2% dividend return provided by the S&P 500.

The board of directors can be seen as consistently enhancing remuneration over time. Since 2010, they have increased dividends annually. Notably, even during the Great Recession, Home Depot maintained a steady level of payments from 2007 to 2009.

From my perspective as an outside observer, it’s clear that while maximizing dividends is important to the company, they also seem capable of meeting their payment obligations. The management anticipates a slight decrease in diluted earnings per share this year, approximately 3% from $14.91, which equates to around $14.26 per share. This projected figure far exceeds the annual dividend of $9.20, suggesting that the company will comfortably meet its dividend commitments.

2. PepsiCo

PepsiCo manages a variety of popular brands for beverages and snacks. Among these are Pepsi, Gatorade, Doritos, and Quaker.

Despite the slowdown, sales have been lackluster due to consumers feeling the pinch from general price hikes. PepsiCo recently disclosed their second-quarter earnings report. After accounting for factors like foreign currency conversions and acquisitions/divestitures, their adjusted sales grew by 2%. Nevertheless, volume continued to decline, contributing a reduction of 1.5%, while price increases accounted for an increase of 4%.

This year, management forecasts a modest increase in revenue, around a few percentage points. This prediction brought a sense of relief to the market, causing the stock price to surge by 7.5% after the financial report was made public.

Although it’s promising, PepsiCo can’t just depend on price hikes for income expansion. Instead, they need to enhance sales volume. Given its robust brand portfolio with a significant market footprint, I foresee an increase in volume as consumers adapt and become accustomed to the changes.

In the present, there’s a strong belief among management and the board about PepsiCo’s long-term prosperity. Notably, they raised the quarterly dividend by 5% earlier this year. This boost implies that the company has ample resources to meet its annual $5.69 dividend rate, considering their expectation of reporting an adjusted EPS exceeding $8.

PepsiCo boasts a remarkable track record of dividends, with few other firms able to match its history. This impressive run recently extended to 53 consecutive years, earning it the title of a ‘Dividend King’. Moreover, the shares offer an appealing 4% return on dividends.

2025-07-23 03:04

1. Home Depot

2. PepsiCo

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