3 Magnificent Dividend Stocks Down 20% to Buy and Hold Forever

Macroeconomic headwinds have weighed on shares of top consumer brands. For income investors, this weakness is a gift, as lower stock prices have pushed dividend yields to attractive levels.

Here's why Home Depot (NYSE: HD), Hershey (NYSE: HSY), and Diageo (NYSE: DEO) are some of the most attractive dividend stocks to buy right now.

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1. Home Depot

Shares of Home Depot are currently trading 29% below their previous high. Sales growth has been pressured by elevated interest rates, which have made financing home projects more expensive. But this is exactly when you want to invest in Home Depot, because the stock won't offer value like this in a roaring economy.

At the current quarterly payment of $2.33 per share ($9.32 annually), the forward dividend yield is 2.98% -- nearly three times the S&P 500 (SNPINDEX: ^GSPC) average. That payout is fully supported by earnings, with a payout ratio of 65%. The yield is also near the high end of the stock's historical range.

In the first quarter, comparable sales increased 0.6% year over year. Adjusted earnings dipped to $3.43 from $3.56 in the year-ago quarter, but steady comp sales are encouraging in this environment. Home Depot is well positioned for faster growth when demand rebounds.

The business is gaining share with professional customers. It's seeing double-digit growth in digital orders and rolling out new artificial intelligence (AI) tools, such as Blueprint Takeoffs, to help Pros plan projects more efficiently.

These new services are helping unlock a larger addressable market, particularly in complex projects, which management estimates to be worth $400 billion. That growth potential, paired with an above-average yield, makes Home Depot one of the best dividend stocks to consider in 2026.

2. Hershey

Shares of Hershey are down 29% from their high as the company has dealt with higher cocoa prices and headwinds from more consumers taking weight-loss drugs. Despite the challenges, its brand portfolio -- including Reese's, Skinny Pop, and Dot's Pretzels -- has held up well.

Organic (currency-neutral) sales grew nearly 8% year over year in the first quarter, while adjusted earnings rose 12%. Hershey still looks capable of delivering steady growth for years, since it's highly unlikely people will ever stop buying chocolate. Statista estimates the global confectionery market at $146 billion in 2026, with annual growth of 5% through 2031.

Hershey is targeting low-single-digit full-year adjusted sales growth for 2026. Management is also working to lift margins through supply chain adjustments, which should support earnings and dividend growth.

Hershey has paid a consistent dividend for 96 years. The payout ratio has recently climbed to around 100% of earnings, which might be alarming. However, when compared to free cash flow, the payout ratio is closer to 60%, indicating payment sustainability. With cocoa prices easing and margins set to improve, the current forward yield of 3% looks especially attractive for the leading chocolate brand.

3. Diageo

Diageo offers the highest yield of the three, currently around 3.88% on a trailing-12-month basis. It paid out 91% of its free cash flow over the last year, which is near the upper end of what's sustainable. But Diageo is targeting higher free cash flow over the next few years. It owns one of the strongest portfolios in beer and spirits -- including Guinness, Johnnie Walker, and Smirnoff -- giving it pricing power and steady cash flow.

The stock is down 61% from its previous high, reflecting recent softness in North America, offset by growth in Europe, Latin America, and China. Overall, Diageo's organic net sales increased 0.3% year over year last quarter, marking an improvement over recent declines. Stabilizing sales, with strong markets offsetting weakness in others, shows the value of its diversified portfolio of more than 200 brands.

Diageo paid $2.3 billion in dividends over the last year, supported by $2.5 billion in free cash flow. This should mark a low point in free cash generation, as management is looking to trim costs and boost annual free cash flow to $3 billion.

Over time, investing in top alcohol stocks when they offer high yields is a good bet. Demand can fluctuate, but it eventually recovers. Diageo should benefit as consumers trade up to premium beverages while consuming less quantity. That dynamic can support higher prices and margins, supporting higher free cash flow.

The stock looks undervalued at these levels, creating a compelling entry point for dividend investors.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey and Home Depot. The Motley Fool recommends Diageo Plc. The Motley Fool has a disclosure policy.