One Magnificent Dividend Stock Down 71%: Too Cheap Not to Buy and Hold Forever

Most investors don't like to see stock prices go down. While net buyers of stocks do benefit from lower prices, the paper losses can make you feel poorer and signal a risk of the market going down further.

There is a silver lining to sell-offs, however. Dividend yields go up, making these pullbacks good opportunities to buy dividend stocks as their prices are down as well.

One dividend stock worth a closer look right now is Nike (NYSE: NKE), which currently offers a yield of 3.2%. Unfortunately, the bump in its yield is more due to the stock's collapse since the pandemic rather than from dividend hikes, though the sportswear giant has a solid track record of raising its quarterly payout.

Nike stock is now down 71% from its all-time high in 2021, and the stock has continued to fall this year, sliding over the last month on the Iran war as rising oil prices and global turmoil that could spark a recession spell potential trouble for Nike.

However, prior to the Iran scare, Nike's prospects for a turnaround were looking promising.

Image source: Nike.

Nike is showing signs of recovery

Nike brought in CEO Elliott Hill to turn the business around a year-and-a-half ago after a disastrous tenure under former CEO John Donahoe. Hill has been trying to right the wrongs committed under his predecessor, who was overly committed to the digital and direct-to-consumer channels, alienating key retail partners, and leaning too much on classic styles, while neglecting to innovate.

Under Hill, Nike has returned to growth in running, a key category, and it delivered positive, though modest, revenue growth over the last two quarters after five quarters of declines.

There's still a lot of work to be done, and macro-level challenges around discretionary spending have plagued both Nike and peers like Deckers and Lululemon, while China has also been a drag on Nike's performance.

Profits are expected to continue to fall as the company is seeking to clear inventory in certain legacy styles, and invest in innovation. However, the overall brand still looks strong. Nike continues to dominate markets like basketball, and its roster of athletes is unmatched in the industry.

The stock isn't likely to deliver a quick turnaround, but it looks oversold at this point, based on its potential. We'll learn more when the company reports third-quarter earnings on March 31. Analysts are expecting revenue to fall 0.4% to $11.2 billion and for earnings per share to decline from $0.54 to $0.28.

While those are ugly numbers, it gives the company a low bar to hop over, and investor attention is likely to be on guidance and forward commentary.

Jeremy Bowman has positions in Lululemon Athletica Inc. and Nike. The Motley Fool has positions in and recommends Deckers Outdoor, Lululemon Athletica Inc., and Nike. The Motley Fool has a disclosure policy.