Investing in high-quality dividend stocks that are trading at 52-week lows can present unique opportunities for investors, particularly in terms of value and yield. These stocks often offer better-than-average values and higher yields. However, the key considerations are the sustainability of their dividend payments and the potential for further declines in stock prices. Here, we explore three high-quality dividend payers, the factors contributing to their current stock prices, and whether they are advisable to buy, sell, or hold as we look ahead to 2025.
United Parcel Service: Can’t Get Much Lower
United Parcel Service (NYSE: UPS) is currently trading not just at a 52-week low but at a five-year low, reminiscent of the peak COVID-19 fears. At this juncture, it appears that UPS has limited room for further decline, and there are indicators suggesting a potential rebound is on the horizon. The drop in share price is primarily linked to a decline in shipping volumes, which has affected the company’s business outlook. However, recent results from competitor FedEx indicate that the core U.S. market began to show signs of growth in Q3. The long-term outlook remains optimistic, with expectations for UPS to return to growth in fiscal 2026, if not sooner in 2025.
The dividend yield is particularly attractive at this level, with the stock trading at only 12 times its earnings forecast and yielding nearly 8%. This yield is almost double that of a ten-year Treasury note, compounded by a strong outlook for share price appreciation. A multi-year rebound in revenue and earnings could sustain a stock price rally that brings it back to record highs. However, investors should be cautious of the high payout ratio and distribution growth rate, which may slow until earnings growth can compensate.
The upcoming Q3 earnings report could serve as a catalyst for change. When the company released its Q2 results, it withdrew its full-year outlook, leaving investors uncertain. The anticipated outcome is that the results will align with FedEx’s, revealing unexpected strength in the core market, which could enhance the outlook and boost investor confidence.
Diageo: Poised for a Rebound in 2026
Diageo (NYSE: DEO) is also trading at a low point, having recently set a new low but showing signs of stabilization at a critical support level. The indicators suggest that the stock may be nearing a bottom, with expectations for a return to growth in the near future, bolstered by several upcoming catalysts.
A new CEO is set to be announced, along with plans to rejuvenate the business and enhance shareholder value. Key details will likely focus on debt management and reduction, which is urgently needed.
Diageo’s dividend yield is appealing, hovering around 4.25% as of late September. The payout ratio stands at a manageable 60% of this year’s earnings forecast, with earnings growth anticipated for the next year. While quarterly distributions can be inconsistent due to the payment structure, the trend toward annualized increases helps mitigate this concern.
ONEOK: Pulls Back to Critical Support
Energy middleman ONEOK (NYSE: OKE) has seen its stock price retreat to critical support, marking a one-year low in September. This pullback is largely due to investor concerns regarding the company’s ability to manage recent acquisitions. However, the results indicate a strong cash-generating position, enabling the company to sustain its dividend while reducing acquisition-related debt. This sets the stage for a robust rebound in the coming quarters.
The dividend yield is substantial at 5.75%. Although the payout ratio is concerning at 80%, this midstream energy operator is a cash flow powerhouse focused on maintaining its dividend. The growth forecast includes a double-digit EPS CAGR, which, while conservative, supports an outlook for distribution increases. While the company may not raise its payment every year, it has a strong track record of increasing distributions more often than not, with no history of cuts.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
