1 Magnificent S&P 500 Dividend Stock Down 24% to Buy and Hold Forever

Despite having the logo plastered over the Olympic uniforms, advertising and marketing that are legendary and shoes that are worn by millions, all was not well at NIKE (NKE -1.41%). So far this year, the stock is down more than 24%. Fortunately, the dominant sportswear maker has something to offer investors to help keep them patient during this difficult time: an above-average dividend of about 1.8%.

That alone doesn’t erase the share price issues, but it certainly helps. For long-term investors looking for a dividend stock they can hold on to for the long term, Nike is an interesting choice at its current valuation.

When in doubt, lean on the brand

Nike’s stock may not be performing well, but it hasn’t resulted in a damage to its brand. Few brands in the world of fashion and clothing are as iconic as Nike. Even fewer — if any — can compete with Nike’s brand power when it comes to shoes. Whether for sports, casual or lifestyle, Nike has spent decades THE access mark.

A world-class brand can be a life jacket when a company is going through a difficult time. It provides customer loyalty and pricing power to help maintain a healthy financial situation. That’s why Nike’s earnings continue to remain strong.

In fiscal year 2024 (ended May 31), Nike made $51.4 billion in revenue. It was only up 1% year-over-year, but it was more than sneakers, Cougar, Under Armour, Skechersand Outdoor deckers (manufacturer of UGG and Hoka) — combined.

NKE Revenue Data (Annual) by YCharts

Nike realizes the importance of wholesale

With the rise of online orders and the popularity of its app, SNKRS, Nike assumed that its direct-to-consumer (D2C) business would be able to hold enough weight to carry the company forward. This led it to cut ties with many major retailers, which was a huge misstep in retrospect.

Wholesale sales declined from the partnerships closed, and D2C sales growth was not enough to compensate. Indeed, “it was a huge mistake, please forgive us,” Nike has made efforts to rekindle some of these wholesale/retail partners.

It announced in the spring of 2021 that it will end its partnership with companies such as Macy’s, Designer brands (DSW), Urban Outfittersand a handful of others, and by the fall of 2023, it had reversed course. I’m sure it wasn’t easy admitting I made a bad business move, but better late than never.

Since re-establishing many of these relationships, Nike’s wholesale business has been given new life. In its most recent quarter, wholesale revenue rose 8% year-over-year to $7.1 billion (5% if you factor in the impact of foreign exchange).

Nike has spent the last few years caring too much about where the shoes were sold instead of focusing on maximizing every possible channel. Still, it’s encouraging to see that this could be changing.

His rating gives him a lot of advantage

If you’ve been a Nike investor for a while, this recent downturn might be enough to keep you up at night; has lost over half of its value since November 2021. If you’re considering becoming a Nike investor, now presents one of the best opportunities we’ve seen in some time.

About three years ago, Nike’s price-to-earnings (P/E) ratio spent time in the 80s. Recently, it’s been in the 20s, well below its average over the past decade.

NKE PE report data by YCharts

A low P/E ratio alone doesn’t make Nike a must-have, but it does give you a chance to invest in it with less of the risk of investing in higher-priced stocks.

Add in Nike’s above-average dividends, healthy balance sheet and brand power, and it becomes much easier to sit back and trust that it will eventually get back on track. If you want to buy and hold Nike stock for the long term (which you should), the upside seems to far outweigh the downside.