Three Dividend-Yielding Stocks Decreasing by 2%, 7%, and 10% as Potential Purchases Before Year's End
As 2024 draws to a close, now's an ideal time to scrutinize your financial path and seek stocks that could help you accomplish your goals in 2025 and beyond. If your objectives involve generating passive income, then this article is for you.
Freeport-McMoRan (FCX -0.24%), York Water (YORW -0.21%), and PepsiCo (PEP -0.16%) have all slumped this year while the broader indexes hover around all-time highs. Here's why each of these dividend stocks could be enticing investments before the new year.
Freeport-McMoRan's better days are waiting
*Lee Samaha(Freeport-McMoRan):* With a dividend yield marginally exceeding the S&P 500** average of 1.3% and a share price that's decreased 32% from its all-time high, this copper miner makes for an attractive dividend stock candidate. Furthermore, its growth potential probably makes it simpler for management to increase its dividend in the future.
The stock is often regarded as a play on copper's price. That's a reasonable perspective as it significantly influences its earnings. However, it's not the whole story; there are additional compelling reasons to invest in the stock.
First, even if you remain neutral on copper's price and concede it remains unchanged (around $4.25 per pound), there's a persuasive case for buying the stock. For instance, management estimates its earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2025/2026 will be $11 billion at $4 per pound and $15 billion at $5 per pound.
By interpolating these figures using the current price of copper, an estimate of EBITDA of $12 billion can be derived. The current enterprise value (market cap plus net debt) of $65.9 billion suggests an EV/EBITDA ratio of just 5.5 in 2025/2026—an exceptional value.
Second, as previously mentioned, Freeport-McMoRan has an exciting leaching initiative that could significantly increase copper production at a relatively low cost. Consequently, the stock is an attractive value for copper bulls and investors willing to maintain a neutral stance on copper's price.
Raise your passive income through York Water before welcoming the new year
*Scott Levine* (York Water): York Water is a water utility stock that merits serious consideration for those aiming to augment their passive income streams in 2025.
Although shares have dropped 9% year to date, investors should not shy away from buying the stock as it seems to be the outcome of the market unfairly penalizing the stock for missing third-quarter earnings estimates. Offering a 2.5% forward dividend yield, York Water has maintained a consistent commitment to rewarding shareholders for decades, and its allure is further enhanced by its reasonably priced shares.
Savvy investors recognize that a company's prior performance does not guarantee future outcomes. However, that doesn't mean that a company's history should be overlooked — particularly when that history spans more than two centuries. Since 1816, York Water has been providing water service, and throughout that time, it has consistently rewarded investors with dividends, making 616 dividend payments and boosting the dividend for the past 28 consecutive years.
How has the company achieved such an impressive feat? Operating as a regulated utility, York Water is assured of certain rates of return.
This, consequently, provides management with a sense of future cash flows and insights into planning for capital expenditures, including infrastructure upgrades, acquisitions, and dividend payments. In 2024, for example, York Water allocated $33 million to upgrade the Lake Williams dam and construct a wastewater treatment plant as well as other projects.
Currently, shares of York Water are trading at 14.9 times operating cash flow, representing a discount to their five-year average cash flow multiple of 20.3. York Water looks particularly appealing for those seeking a reliable dividend stock right now.
PepsiCo: A high-yield stock at a bargain price
*Daniel Foelber (PepsiCo):* It's been a successful year for the consumer staples sector, which has risen over 13% year to date. Certainly, it's not as impressive as the S&P 500, but the sector tends to underperform growth-driven rallies in major indexes because numerous top holdings are stodgy, low- to moderate-growth companies.
The sector may not attract risk-tolerant investors seeking significant upside potential. However, companies like Pepsi are tailored for individuals looking to boost their passive income or finance their retirement.
On Nov. 19, the food and beverage giant raised its dividend for the 52nd consecutive year — lifting the payout to $5.42 annually. At the time of this writing, this translates to a yield of 3.4% — the highest level in 10 years if you exclude the brief surge in Pepsi's yield during the COVID-19-induced stock market sell-off in March 2020.
According to the graph, Pepsi is currently trading at a lower than usual price-to-earnings ratio of 23.3, which is 2.8 points less than its average P/E ratio over the past decade of 26.1. This suggests that Pepsi meets the criteria for a solid dividend history, high yield, and undervalued stock.
However, there are several reasons why Pepsi's shares are not as expensive as they may appear. Firstly, Pepsi's growth has slowed down. By the end of 2024's first three quarters, it reported a 2% decrease in volume for its convenience foods and a 1% decrease in beverage volume. The company is anticipating a 7% increase in core earnings per share for 2024 compared to 2023, but this rise is largely a result of price hikes.
Pepsi's management has acknowledged the impact of price sensitivity on its earnings. To counteract this, they're generating value for consumers through innovative marketing strategies and offering larger product quantities. While these strategies could revive volumes, they may lead to reduced profits in the short term. Thus, 2025 might be the year when Pepsi recovers its momentum, reducing its reliance on price increases for earnings growth.
Inspite of its challenges, Pepsi is still a highly profitable organization with a robust supply chain and distribution network. It continues to expand its range of products and acquire new brands. On October 1, 20XX, Pepsi acquired Siete Foods for $1.2 billion, adding to its lineup of tortillas, salsas, seasonings, sauces, cookies, and snacks. In November, it acquired the remaining 50% stake in Sabra Dipping Company LLC and PepsiCo-Strauss Fresh Dips & Spreads International GmbH, expanding its offerings in on-the-go snacks.
Pepsi boasts a wide variety of popular brands that cater to every non-alcoholic beverage category and snack products, from Pepsi-owned Frito-Lay and Quaker Oats. Its extensive product range makes it an attractive investment option for individuals looking for a reliable dividend-paying company with a reasonable valuation.
After analyzing the given text, I've identified two sentences that contain the words 'finance', 'money', and 'investing'. Here they are:
- If your objectives involve generating passive income, then this article is for you, as it provides insights into dividend stocks such as Freeport-McMoRan, York Water, and PepsiCo, which could potentially boost your money-making potential in the finance world.
- To further grow your wealth and finance your goals, consider investing in companies like PepsiCo that have a strong track record of increasing their dividends year after year, such as the 52nd consecutive annual dividend increase mentioned in the article.
