1 Great S&P 500 Dividend Stock Drops 24% to Buy and Hold Forever

Despite the logo being plastered all over Olympic uniforms, the legendary advertising and marketing, and the shoes being worn by millions, not all has gone well Nike (NKE -2.23%). So far this year, the stock has fallen more than 24%. Fortunately, the dominant sportswear maker has something to offer investors to keep them patient during this tough period: an above-average dividend of about 1.8%.

That alone won’t solve the stock price problems, but it certainly helps. For long-term investors looking for a dividend stock they can hold for the long haul, Nike is an interesting choice at its current valuation.

When in doubt, trust the brand

Nike stock may be struggling, but that hasn’t led to a deterioration of the brand. Few brands in the fashion and apparel world are as iconic as Nike. And even fewer, if any, can compete with Nike’s brand strength when it comes to footwear. Whether it’s sports, casual or lifestyle, Nike has been in business for decades the favorite brand.

A world-class brand can be a lifeline when a company is going through a tough time. It provides customer loyalty and pricing power to keep the finances healthy. That’s partly why Nike’s revenue figures remain strong.

In fiscal year 2024 (ending May 31), Nike generated $51.4 billion in revenue. It was only 1% more than last year, but it was more than Adidas, puma, Under Armour, SkechersAnd Deckers Outside (maker of UGG and Hoka) — combined.

NKE Income (Annual) Data by YCharts

Nike realizes the importance of wholesale

With the growth of online ordering and the popularity of its app, SNKRS, Nike assumed its direct-to-consumer (D2C) business could carry enough weight to propel the company forward. This led to it cutting ties with many major retailers, which in retrospect was a huge mistake.

Wholesale sales were down due to the ended partnerships, and D2C sales growth wasn’t nearly enough to make up for it. In true “that was a huge mistake, please forgive us” style, Nike has attempted to revive some of these wholesale/retail partners.

In the spring of 2021, it announced that it would expand its partnership with companies such as Macy’s, Designer brands (DSW-), Urban outfittersand a handful of others, and by the fall of 2023 it was reversed. I’m sure it wasn’t easy to admit you made a bad business move, but better late than never to admit the mistake.

Since re-establishing many of those relationships, Nike’s wholesale business has been revitalized. In the most recent quarter, wholesale sales rose 8% year-over-year to $7.1 billion (5% if you include the impact of currency exchange rates).

Nike has spent too much time focusing on where its shoes are sold in recent years, rather than focusing on maximizing every possible channel. It’s encouraging to see that this could change.

Its appreciation offers a lot of potential

If you’ve been an investor in Nike for a while, this recent slump may be keeping you up at night. Since November 2021, it’s lost more than half of its value. If you’re considering becoming an investor in Nike, this is one of the better opportunities we’ve seen in a while.

About three years ago, Nike’s price-to-earnings (P/E) ratio was in the 80s. Lately, it’s been in the low 20s, well below its decade-to-date average.

NKE PE Ratio data by YCharts

A low price/earnings ratio doesn’t necessarily make Nike a must-have, but it does offer you the chance to invest with less risk than investing in stocks with a premium.

Add in Nike’s above-average dividend, healthy balance sheet, and brand strength, and it becomes a lot easier to sit back and trust that things will eventually get back on track. If you want to buy Nike stock and hold it for the long term (and you should), the pros appear to far outweigh the cons.