1 Dividend Growth Stock Down 45% to Buy Right Now

Share prices of Coca-Cola (NYSE: KO) have risen around 15% so far in 2025 as the S&P 500 index has fallen. Hormel Foods' (NYSE: HRL) stock price has dropped along with the broader market. While Dividend King Coca-Cola's shares are trading near all-time highs, long-term investors might be better off with fellow Dividend King Hormel, which is now around 45% below its all-time high. Here's what you need to know.

Coca-Cola is a great company

There is nothing wrong with Coca-Cola as a company. It does a wonderful job selling its beverages around the world. In fact, given its size, distribution network, marketing skills, and diversification, it is highly likely that Coca-Cola remains an industry-leading consumer staples company for years to come.

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There's only one problem. As famed value investor Benjamin Graham pointed out long ago, being a good company is not the same thing as being a good investment. Or, to paraphrase Graham, paying too much for a good company can turn it into a bad investment. Right now, Coca-Cola stock looks fully valued, if not a little expensive.

Not only is Coca-Cola's stock trading near its all-time highs, but its price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages. The consumer staples giant's dividend yield, at 2.8%, is also near its 10-year low point. Investors looking for reliable dividend stocks at bargain prices aren't likely to be interested in Coca-Cola right now.

Hormel Foods is on the sale rack

By comparison, Hormel Foods appears deeply out of favor. The food maker's shares are down roughly 45% from their all-time highs and off by about as much as the S&P 500 index so far in 2025. Hormel's dividend yield is 3.9%, which is near the highest levels in the company's history. As for valuation metrics, Hormel's P/S, P/E, and P/B ratios are all below their five-year averages.

That said, there is one thing that unites Coca-Cola and Hormel. They are both Dividend Kings, with over five decades' worth of annual dividend increases behind each company. Both companies have been unstoppable dividend growth stocks, thanks to strong business models that get executed well in both good times and bad times. Right now, Hormel is working through a bad time, and investors are fearful of the stock.

There are real problems to consider, notably Hormel's trouble passing through price increases, slow growth in China, and avian flu. It has also been dealing with some problems at Planters, a recently acquired brand. Individually, all of these issues are surmountable. Facing them all at one time is, indeed, worrying. But Hormel's long and successful history and continued dividend increases suggest this Dividend King will muddle through. To that end, it is cutting costs, raising prices, and focusing on innovation, a historical strong point for the company.

If you buy Hormel now, meanwhile, you are getting what appears to be an attractive price. And you are getting a higher dividend yield than you would with an investment in consumer staples peer Coca-Cola, despite both being Dividend Kings.

Hold your nose and invest for the long term

Investors jumping into Coca-Cola today are likely doing so because they are looking for a safe haven investment. If you think in decades, however, turbulent markets can be an opportunity to buy stocks while they appear cheap. That's what seems to be the case with Hormel if you have a contrarian bent. You might have to hold your nose before you buy it, but if history is any guide, the unstoppable dividend growth at Hormel will continue in the future just like it has in the past.

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Reuben Gregg Brewer has positions in Hormel Foods. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.