Dividends are highly valued because robust, consistently growing dividend stocks typically continue to reward shareholders on a regular basis, regardless of broader economic conditions. Even better, these companies often raise their dividend payments over time—sometimes every year.
When a stock's price drops, its dividend yield can become especially attractive. This is due to straightforward arithmetic: a dividend yield is calculated by dividing a company's annual dividend by its current share price. For example, if a stock trades at $80 and pays a $1 quarterly dividend ($4 per year), its yield is 5% ($4 divided by $80 equals 0.05, or 5%).
In this scenario, if the share price declines to $60, dividing $4 by $60 gives you 0.067, or 6.7%. As you can see, lower prices result in higher yields, assuming the dividend stays the same.
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With that in mind, here are three S&P 500 companies with dividends whose share prices have dropped by at least 33% this year. Each has delivered impressive results in the past and has strong prospects ahead, so consider whether any are worth further investigation.
1. United Parcel Service
First up is United Parcel Service ( UPS 1.41%). Its stock has fallen roughly 33% so far this year, and its dividend yield recently reached an eye-catching 7.8%. (For example, a $5,000 investment in UPS would generate about $390 in annual dividends.)
What’s behind UPS’s decline? The economy is currently facing uncertainty, with concerns about inflation, tariffs, and job stability weighing on consumers. As a result, online shopping activity has slowed. Additionally, UPS has intentionally reduced its business with Amazon.com, which has built out its own delivery network.
Consider investing in UPS only if you believe in its long-term potential. I do, as I see e-commerce as a lasting trend. The stock appears attractively priced at current levels, with a forward P/E ratio of 11.3—well below its five-year average of 15.8.
2. Target
Target ( TGT 0.81%) is a well-known retailer, generating $107 billion in net sales in 2024 and owning more than 45 brands. The company operates 1,989 stores across the U.S. and employs over 400,000 people. Target also donates 5% of its profits to local communities, totaling millions each month.
Target’s shares have also taken a hit, recently down about 35% year to date. This is partly due to the company moving away from its diversity, equity, and inclusion (DEI) initiatives, as well as lingering supply chain problems from previous years. Many investors see these as short-term and solvable issues, but it’s important to form your own opinion before investing in any business.
Target’s dividend yield recently stood at 5.3%. When you include recent share buybacks, the total yield to shareholders was about 8.02%. Over the past ten years, the dividend has grown at an average annual rate of 8.8%.
The stock’s forward P/E ratio of 11.8 is significantly lower than its five-year average of 16.2, indicating it may be undervalued. If you’re optimistic about Target’s long-term prospects, holding the stock could reward your patience as the company recovers.
3. Constellation Brands
Constellation Brands ( STZ -0.12%) has dropped 40% so far this year, which has pushed its dividend yield up to 3.1%. Including substantial recent share repurchases, the total return to shareholders is closer to 8%.
Constellation Brands produces and distributes alcoholic drinks, primarily in the U.S., Mexico, New Zealand, and Italy. Its portfolio includes well-known labels like Corona, Modelo, Robert Mondavi, High West, and Casa Noble.
What’s causing Constellation’s steep decline? Alcohol consumption among younger Americans has been falling, and concerns over tariffs and immigration have led to reduced beer spending among Hispanic consumers.
Is a turnaround possible for Constellation? It’s certainly possible. The company is working to improve its results by emphasizing its premium brands and reducing expenses.
The stock also appears undervalued at current prices, with a forward P/E ratio of 11.3, much lower than its five-year average of 18.2. If you believe demand for beer and other alcoholic beverages will persist, and that Constellation can adjust to shifting consumer preferences, now may be a good opportunity to consider this stock.
If any of these companies catch your interest, take the time to research them further. There are also many other appealing dividend stocks and excellent dividend-focused ETFs available in the market.
