Nike Is Down 79%. Is It Finally the Ultimate Dividend Stock to Buy and Never Sell?

Nike's (NYSE: NKE) key growth strategies over the past decade have been largely unsuccessful. In some cases, they've actually created significant setbacks for the business. As a result, the company's stock is down about 34% in the last 10 years -- and down about 79% from its valuation peak.

On the other hand, big sell-offs and continued payout increases have pushed the stock's dividend yield up to roughly 4.5%. So, does Nike stock stand out as a great buy-and-hold dividend play at these prices?

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What's Nike up against?

Nike's dividend yield has never been higher, and it's now at a level that warrants consideration from income-focused investors. Conversely, the stock sell-offs that have pushed the yield up to its current levels have not happened by accident -- and the company is facing some real challenges.

For starters, the company's big bet on China appears to be failing. Revenue from the company's Greater China segment declined 11% year over year last quarter, and it doesn't look like a turnaround in the market will be happening anytime in the near future. Nike has lost ground to domestic Chinese brands, and this shift in consumer preferences is not an easy thing to reverse.

Nike's focus on direct-to-consumer (DTC) sales also wound up making it easier for rival brands to strengthen their footholds in the U.S., Europe, and other markets. Amid ongoing growth for the e-commerce market, cutting out retail intermediaries and focusing on DTC channels had seemed like a sensible move that could boost margins. However, diminished featuring from retail partners appears to have had a significant adverse effect on the brand.

Is Nike stock a worthwhile dividend play?

With a yield of roughly 4.5%, Nike stock deserves consideration from income-focused investors. Despite the challenges facing the business, the company continues to have solid financial foundations. It's still posting profits, and its roughly $11 billion in debt against $9 billion in cash and equivalents at the end of last quarter shows the balance sheet isn't distressed.

Depressed earnings mean that the company's dividend payout ratio is relatively high right now, but Nike also has a 24-year streak of delivering annual payout growth. There's a good chance that the company will push that streak to 25 years before 2026 is out, but it's also likely that the payout hike will be relatively modest.

Dividend growth will likely continue to be small for the foreseeable future, and a dividend cut is a real possibility if the company's annual earnings continue to fall. With revenue likely to remain under pressure due to weakness in the Greater China segment and other headwinds, Nike is tasked with reducing costs while still engineering a return to growth.

I think the stock is a worthwhile buy for long-term dividend investors right now, but the company still faces significant execution risks.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.