If you've got $5,000 you can afford to invest in the stock market today, there are some good opportunities that can make the most of that money. Not only can you find some good long-term buys trading at cheap valuations, but there are also some safe dividend stocks that are trading near their 52-week lows.
Buying dividend stocks at modest valuations can give you the opportunity to lock in higher-than-normal yields while also potentially setting yourself up for the possibility to earn great returns if the stocks end up rallying. Three stocks that could be great options to invest $5,000 in right now are CVS Health (NYSE: CVS), United Parcel Service (NYSE: UPS), and Hershey (NYSE: HSY).
CVS Health
Healthcare company CVS Health is having a tough year. Its shares are down 28% and it's trading near its 52-week low of $52.77. A lot of the damage is self-inflicted, unfortunately, as the company has reduced its guidance for the year three times -- and there are still two quarters left!
The company has been experiencing an uptick in medical expenses that has adversely impacted its health insurance business. That's the bad news. The good news is that this trend isn't likely to persist over the long haul. Surgeries were put off and delayed during the height of the pandemic and amid a return to normal, there's been an increase. But that should normalize in the years ahead. And other areas of CVS (health services, pharmacy) aren't doing nearly as bad. Adjusted operating profit declined by more than $700 million this past quarter, but the health benefits segment accounted for the bulk of that drop -- $600 million.
And even with the decline, the stock's payout ratio remains sustainable at 45% of earnings, suggesting that CVS' dividend is safe. At 4.7%, you could secure a dividend that pays more than 3 times the S&P 500 average of 1.3%. There could still be more of a decline in CVS' share price in the near term -- but if you're willing to be patient with the stock, it may prove to be a great buy.
United Parcel Service
Logistics giant United Parcel Service, better known as just UPS, is trading within a few dollars of its 52-week low of $123.12. The company has been feeling the effects of some challenging economic conditions with its consolidated revenue declining by 1% in the most recent quarter (which ended in June) to $21.8 billion. Profits were down by almost 30% with UPS reporting adjusted diluted earnings per share of $1.79 for the period.
Management is confident it can get back to growing its earnings, but potentially worsening economic conditions may not help with that goal. The near future could present UPS with further challenges. Still, in the long run it's not a bad move to invest in one of the top logistics companies in the world. Analysts from Mordor Intelligence project that the freight and logistics market could be worth a massive $8 trillion by 2030 as it grows at a compound annual rate of more than 5%.
UPS may be struggling now and its payout ratio may be a bit concerning at a little over 100%, but as it trims costs and works on growing its bottom line, that percentage should come down. With a dividend yield of 5.1%, UPS can provide investors with a great incentive to be patient with the stock.
Hershey
Another underrated dividend stock to own is that of candy company Hershey. It's up a modest 4% this year but it still remains within 10% of its 52-week low of $178.82. It also pays an above-average dividend that yields 2.8%. It's not as high as the other stocks on this list, but it too can be a good option for income investors to consider.
The company is seeing demand come in a bit lighter due to a slowdown in discretionary spending. Sales in the most recent quarter, which ended in June, were off by nearly 17% with revenue coming in a little less than $2.1 billion. Hershey experienced a 21% decline in its North American confectionary segment but it did see an encouraging 6% sales growth its salty snacks division. Despite the tough quarter, the company is still expecting 2% growth in its net sales for the current year, and no more than a 3% decline in reported earnings per share.
Hershey's payout ratio remains manageable at 57%, which is a good sign to investors that there's ample buffer there to support the current dividend. With some strong brands in its portfolio, including Reese's, Rolo, and dozens of others, this can be an excellent food stock to invest in for the long haul.
Should you invest $1,000 in CVS Health right now?
Before you buy stock in CVS Health, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CVS Health wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $650,810!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
*Stock Advisor returns as of September 3, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey. The Motley Fool recommends CVS Health and United Parcel Service. The Motley Fool has a disclosure policy.
Got $5,000? These 3 High-Yielding Dividend Stocks Are Trading Near Their 52-Week Lows was originally published by The Motley Fool