2 Dividend stocks down on their luck, poised to bounce back

Income investors looking for solid dividends in companies poised for a comeback should not overlook the following two stocks. Both stocks face headwinds and slowing growth, but offer solid and steady dividends while you wait for the headwinds to die down. Here’s a closer look at Original parts (GPC 0.10%) and JM Smucker (SJM 0.09%).

Unflattering guidance

Established nearly 100 years ago, Genuine Parts is a global service company specializing in the distribution of automotive and industrial spare parts with an extensive network of over 10,700 locations in 17 countries.

If you’re looking for an income stock that’s currently out of favor with the market, look no further than Genuine Parts. In the last six months, the stock and S&P 500 they moved in opposite directions, with the former posting a 9% decline and the latter a 9% gain.

Part of the lagging share price has to do with recent financial guidance updates, which have not been flattering. Full-year total sales growth moved from a 3% to 5% range to a 1% to 3% range. Adjusted earnings per share (EPS) fell from $9.80 to $9.95 to a range of $9.30 to $9.50.

But with Original Parts, investors get an incredibly stable business despite its current slowdown. In fact, between 2013 and 2023, the 10-year compound annual growth rate (CAGR) of revenue was 7%, and the 10-year CAGR of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was impressive . 8%

The good news for investors is that while new car prices remain high, this is pushing demand for replacement parts higher as more consumers repair instead of buying new. The company’s dividend track record is also impressive, with 2024 marking the company’s 68th consecutive year of dividend growth. It boasts a current dividend yield of 2.8%, which is a yield worth considering while we wait for headwinds for the company to subside.

Innovation on deck

JM Smucker is a leading retailer of both human and pet food products and carries well-known brands such as Folgers, Dunkin’, Café Bustelo, Jif, Smucker’s, Hostess and Meow Mix, among many others. The company also boasts 95% of its US retail channel sales in categories where it holds the No. 1 brand position. 1 or no. 2, and its products are found in over 90% of US homes.

JM Smucker is in a similar position to Genuine Parts: Slower-than-desired growth coupled with subdued guidance has led the company’s stock to trail the S&P 500 over the past six months. You might not notice the growth struggle if you’re just looking at results from the first quarter of fiscal 2025. That’s because net sales rose $319.9 million, or 18%. However, when you strip out the company’s recent acquisition of Hostess brands and foreign exchange, net sales rose a much more modest 1%.

JM Smucker also updated its guidance for the full year, lowering net sales growth to a range of 8.5% to 9.5%, from previous guidance of 9.5% to 10.5%. It also expects lower adjusted earnings per share and free cash flow. The company hopes its push for innovation will help reverse its sluggish growth. JM Smucker is working to grow Café Bustelo’s market share in the US market by introducing new Jif To Go Nut Spreads, new marketing and merchandising for Crustables and the first microwavable Hostess product with Meltamors.

SJM Dividend Data by YCharts

Finally, you can see JM Smuckers’ dividend growing steadily over time, and it offers a current dividend yield of 3.5% as investors await innovation and acquisition synergies to improve the company’s financials.

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Both companies face retail headwinds that are hampering growth, so savvy long-term shareholders should largely ignore the cyclicality of the retail industry. Both companies have a path to sales growth through innovation, and both should be on track in the coming year. Meanwhile, you have two companies with a proven track record of delivering shareholder value through stable dividends.