3 Great S&P 500 Dividend Stocks Down 22%, 35%, and 45% to Buy and Hold Forever

If you insist on buying your dividend stocks at a discount, you are largely out of luck right now. Although the S&P 500 it has been uncomfortably volatile since July, is still up more than 30% from the November low, and still in sight of record highs. There just aren’t many deals to choose from.

There are a few worthy prospects, though, if you’re willing to dig hard enough.

Here’s a roundup of three beaten-down S&P 500 dividend stocks you might want to consider scooping up before a bunch of other investors decide to do the same.

1. United Parcel Service

There is no denying the fact that ending the COVID-19 pandemic has proven challenging United Parcel Service (UPS 0.11%). The stock has risen following a wave of online shopping, but the return of in-person shopping from 2022 has affected investor sentiment. Economic lethargy and new (and more expensive) labor contracts also have some credit for their recent weakness. In all, UPS shares are now down 45% from their early 2022 peak.

It is arguable, however, that sellers have neglected their target for fear that the problems will persist longer than initially expected, and further erode their business.

You see, shipments – at least in this company’s important US market – are actually growing. The Institute of Supply Management’s measures of total shipments from manufacturers and service providers continued to inch higher than their 2023 lull.

US ISM manufacturing supplier shipment index data from YCharts

Consumers are also doing their part. The e-commerce giant AmazonThe North American business saw a 9% increase in its total business last quarter, while its international operation experienced growth of almost 7%.

In a similar but separate vein, the American Association of Railroads reports that total rail traffic in North America is in line with levels seen last year and even the year before, while rail traffic intermodal is higher than it has been in the last three years. This has implications for UPS simply because goods shipped in intermodal containers are also the types of goods most likely to end up in the back of a UPS delivery van. Therefore, while this year will be a bit of a bust, analysts expect United Parcel Service’s revenue to grow nearly 5% next year, leading to even greater growth in earnings.

There are states of higher growth and higher yield to be sure. There’s not much sporting the same 5% future dividend yield that UPS stock currently does, especially given its relatively low level of risk versus its strong growth prospects.

2. Devon Energy

Devon Energy‘s (DVN -1.76%) The future yield of 4.7% is as juicy as United Parcel Services, but there is a catch. That is, the payment of this stock is not consistent. Ebbs and flows in step with the company’s ever-changing earnings. If you need a reliable and predictable income to pay your recurring bills, this is not the ideal name to start with.

If you’re able to digest erratic dividend income in exchange for above-average income potential, however, the ticker’s 22% fall from its April peak is an income opportunity.

Devon Energy is in the oil and gas business. Its focus is on land projects in the central United States, with five core sites that run from southern Texas to North Dakota. Last quarter it churned out an average of 335,000 barrels of crude oil and 1.1 billion cubic feet of natural gas each day, more or less matching its recent output.

The energy business is difficult, of course. The market price of oil and gas is constantly changing, but the cost of drilling and extraction does not change nearly as much. This is why the sector’s profits seem to rise when oil prices are high, but profits slump when crude prices are even modestly depressed. Devon is no exception to this dynamic.

Devon is something of an exception to most of its oil and gas peers, however, in that it distributes most of its earnings in the form of dividend payments. In this light, it is very much a direct play on the price of oil itself. Not a bad bet to make either, given that OPEC, ExxonMobiland Standard & Poor’s all predict that we will use at least as much of the things in 20 years as we use today.

3. Franklin Resources

Finally, add an investment management outfit Franklin Resources (WELL -1.85%) to your list of S&P 500 dividend stocks to buy and hold forever. Its 35% selloff since the end of last year has dragged the stock to near a four-year low and brought its expected dividend yield to more than 6%.

The pullback makes some superficial sense. Investors seem to be increasingly interested in exchange-traded funds (ETFs), or even individual stocks. Traditional mutual funds like those that his investment firm Franklin Templeton mainly manages seem to be in trouble. (Franklin it does it also manages some ETFs, but this is not the bulk of its business).

This assumption ignores a couple of important facts regarding Franklin Resources.

The first of these realities is that, despite the growing interest in ETFs and must have individual shares such as Nvidia or Amazon, people do not lose interest in conventional funds. Data from the Investment Company Institute indicates that US fund companies will manage $28.6 trillion worth of assets at the end of 2022, down slightly from the 2021 record thanks to the market bears at the moment, and on the way to the end of last year of $ 33.6. trillion. Most of this money is invested in ordinary mutual funds rather than exchange-traded funds. Frankin’s total assets under management (AUM) is currently $1.66 trillion, surpassing its late 2021 peak of nearly $1.6 trillion.

The other misunderstanding is how the fund management business works. While these companies certainly thrive on bull markets that generate investor interest, mutual funds still have their management fees based on the amount of assets invested even when their funds perform poorly. That’s how Franklin managed to hold up so well in 2022 despite the market’s relatively poor performance back then. The key is simply to attract and then keep the investors’ money.

And the analysts did not expect that this company had problems to do that. They collectively call for revenue growth of 7% this year followed by another 6% growth next year, reviving earnings growth.

These earnings certainly support dividend payments that have grown every year for the past 44 years. You’d be hard-pressed to find a better story than that.