Dividend Stocks with Potential Amid Market Declines

A recent report highlights the decreasing dividend yield of the S&P 500 and identifies high-yielding stocks such as Chevron, UPS, and Dow, despite their recent sell-offs. Investors may find valuable opportunities as key metrics suggest potential recoveries, particularly in free cash flow and earnings.

Date: 22-12-2024

AI Rating: 6

The report notes a decline in dividend yield for the S&P 500, now at just 1.3%. This trend, influenced by the rise of growth stocks, may steer income-focused investors towards stocks with higher yields. Chevron, UPS, and Dow are highlighted for their dividend yields of 4.5%, 5.3%, and 7%, respectively. However, all three have faced recent selloffs, placing them near their 52-week lows, raising concerns among investors.

Free Cash Flow (FCF): The analysis indicates Chevron's strong performance in generating free cash flow, outperforming ExxonMobil in the previous five years. Furthermore, the acquisition of Hess, now cleared by the Federal Trade Commission, is likely to enhance Chevron's FCF going forward, potentially allowing for increased dividend payouts. This outlook engages investors looking at dividend growth as a critical performance indicator.

Revenue Growth: While not directly stated, the report mentions Chevron's management expectations of growing revenue through the Hess acquisition. This positive trajectory may buoy investor confidence despite the near-term uncertainties regarding arbitration with ExxonMobil.

UPS is currently navigating challenges, including a slowdown in package deliveries attributed to economic weaknesses and a labor dispute that has led to elevated costs. Despite these struggles, the report indicates that UPS is witnessing growing delivery volumes again and anticipates an earnings recovery projected at 17% improvement in 2025 which could stabilize stock performance.

Dow, facing a decline in its stock value due to market sensitivities tied to interest rates and global demand challenges, is poised for a longer-term recovery. The company’s investment-grade credit rating suggests financial stability, though investors may adopt a wait-and-see approach pending future earnings reports that could offer more insight. Analyst consensus estimates suggest earnings per share may increase in 2025 despite the broader struggles from high interest rates.

Stocks: CVX UPS DOW