Table of Contents
The widely followed S&P500 The index includes some of the strongest companies in the world, and many of these industry leaders regularly pay dividends to shareholders. Let’s look at two elite ones S&P500 companies that have seen their share prices plummet this year, but are now achieving returns that are more than double the average return of the index.
1.Starbucks
The world’s most popular coffee chain has received a lot of attention from investors this year after the recent share price drop. With approximately 39,000 stores worldwide, Starbucks (NASDAQ:SBUX) is not immune to weakness in consumer spending. It has managed to weather the inflationary environment in recent years with double-digit percentage sales growth, but macroeconomic headwinds could catch up with the company.
Starbucks reported an unusual decline in sales last quarter, mainly caused by an 11% decline in comparable sales in China. That lack of sales caused the stock to plummet: it is now 41% below its 2021 peak.
Investors should expect stocks to eventually recover. Starbucks is a dominant brand with room to grow. Management has set a goal of opening 55,000 stores worldwide by 2030, which provides insight into its long-term revenue growth plans.
One indication that the recent sales decline is not indicative of the company’s true strength can be found in its loyalty program. The number of loyalty members in the US market grew 6% year-on-year to 32.8 million last quarter. While competition in the Chinese market may weigh on overall growth in the short term, Starbucks can use new product offerings and rewards to maintain its premium brand position in a growing coffee market.
Despite its recent struggles, analysts still expect Starbucks to achieve annualized earnings growth of around 12% in the coming years. This should allow the company to maintain its impressive rate of dividend growth: a rate of 20% annually over the past fourteen years. At recent stock prices, the current quarterly payout of $0.57 per share gives the stock a dividend yield of 3.13%, which is more than double the S&P 500’s 1.32% yield.
2. Johnson & Johnson
Another quality company with a long track record of regularly increasing dividends is healthcare Johnson & Johnson (NYSE: JNJ).
J&J’s stock price is down 19% from its early 2022 high. Some of that dip can be attributed to legal liability concerns related to lawsuits related to its talc products. J&J is doing its best to resolve these (hopefully) headwinds in the short term. The dip can also be partly attributed to concerns about J&J’s growth prospects in the coming years, when it will lose patent exclusivity on some of its pharmaceutical products, opening the door for other companies to make generic versions, which will put a brake on put on sale. . But Wall Street is underestimating the company’s track record of developing new pharmaceutical products that could close the gap and fuel further growth.
Johnson & Johnson has a long history of innovation. The country has been steadily increasing its research and development budget for years, spending more than $15 billion on it last year alone. The company is continually investing in its pipeline of new treatments and technologies that will continue to grow the business, as it has done for more than a century. In fact, products launched in the past five years made up a quarter of J&J’s total sales last year.
It is a quality company due in large part to management’s history of achieving high returns on capital. In addition to the product pipeline, management is always looking for opportunities to make strategic acquisitions that expand capabilities in high-growth areas of healthcare, including the medical technology segment. The company just completed its acquisition of Shockwave Medical, expanding its presence in the fast-growing cardiovascular interventional device market.
Johnson & Johnson’s profitable operations have funded growing dividends for more than 60 years. The company recently increased its quarterly payment by $0.05 per share, bringing the future dividend yield to 3.32% at the current share price.
Should You Invest $1,000 in Starbucks Now?
Before you buy shares in Starbucks, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Starbucks wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $774,281!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns July 15, 2024
Johannes Ballard has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and Starbucks. The Motley Fool has one disclosure policy.
2 Great S&P 500 Dividend Stocks Down 19% and 41% to Buy and Hold Forever was originally published by The Motley Fool