Buying a dividend stock when it’s near its 52-week low means you have an opportunity to secure a higher-than-typical yield. A falling share price pushes a yield up, and as long as the business’ fundamentals are strong, you can benefit both from its recurring dividend payments and a possible rally in its share price in the future.
Three stocks that yield more than 4% and that are near their lows for the past year are PepsiCo (NASDAQ: PEP), General Mills (NYSE: GIS), and Chevron (NYSE: CVX). They are all off to poor starts for 2025, but here’s why you may want to consider investing $5,000 into them today.
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Snacking and beverage giant PepsiCo hasn’t been a hot buy with investors this year; it has fallen by 15%. While its growth rate hasn’t been impressive, investors may be a bit overly bearish on the stock.
In its most recent quarter, which wrapped up on March 22, the company’s sales totaled $17.9 billion, representing a decline of 1.8% year over year. And PepsiCo’s operating profit fell by 4.9%. That’s not a great performance, but it’s not disastrous, and it comes at a time when consumers are tightening their budgets amid inflation and concerns about a possible recession on the horizon.
PepsiCo isn’t standing still, either. The business is continuing to expand, and earlier this year, it announced a $2 billion acquisition of soda company Poppi, a prebiotic brand that caters to health-conscious consumers. It’s a good way to diversify and reach a different type of customer, which may help improve its growth rate in the process.
PepsiCo’s dividend, which currently yields 4.4%, well above the S&P 500 (SNPINDEX: ^GSPC) average of 1.3%, is still safe with a payout ratio of around 80%. Ideally it would be lower, but it doesn’t look to be at any risk right now of being cut. This is also a Dividend King, so the outlook would need to be particularly dire for PepsiCo’s management to break its impressive streak of dividend increases, which will hit 53 years with its upcoming June payment.
The stock currently trades just a few dollars from its 52-week low, and at a modest price-to-earnings multiple of 19, PepsiCo can be an underrated buy and a great place to invest $5,000. Not only can you generate approximately $220 in annual dividend income from the stock via its dividend by investing that much, but you can also net a decent return if it’s able to recover from its decline this year.
Another high-yielding stock to consider investing $5,000 into right now is General Mills, which pays 4.5%. It has fallen 16% this year, and it too is within a few dollars of its 52-week low.
It’s also coming off a tough quarter, with sales of $4.8 billion falling by 5% for the period ending Feb. 23. Its operating profit was down by just 2.1%, although that would have been worse if not for a divestiture gain of $95.9 million. Earlier this year, General Mills announced the completion of the sale of its Canada Yogurt business, in an effort to “reshape” its portfolio.
General Mills has a diverse business as it is, with a presence in multiple food categories, including snacks, cereals, and baking. Simplifying its operations can help with improving efficiency and focusing on higher-growth areas. The company has been working on improving margins and achieving cost savings, which can help position it for better results in the future. That bodes well for a dividend, which already looks safe as it is; General Mills’ payout ratio is just above 50%.
For income investors, this can be yet another good stock to count on for recurring cash flow.
The highest-yielding stock on this list is Chevron, which currently pays right around 5%. The oil and gas company recently reported underwhelming numbers, as its profits were down more than 36% year over year, from $5.5 billion to just $3.5 billion for the period ending March 31.
Falling crude oil prices have weighed on its performance, but that is the kind of volatility that investors need to expect with this type of investment, which is highly vulnerable to changing commodity prices. But despite the volatility, the stock has remained a stable income-generating investment to hang on to, with Chevron raising its payout for 38 consecutive years.
The stock has declined by 6% this year, trading at 16 times its trailing earnings, and is approaching its 52-week low. As a leading oil and gas producer, however, it’s a solid stock to hold for the long term. While there will be periods of volatility, it has proven that it can adapt to changing and adverse market conditions, and still being able to pay and increase its dividend over the years. If you’ve got $5,000 you can afford to invest in the market, this is another good dividend stock to consider for your portfolio.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
