3 High-Yield Dividend Stocks to Buy That Could Turn Things Around in the Second Half of 2025

Key Points

• While they have established names, UPS, Target, and Smucker have all seen earnings declines.

• All three stocks have sold off, even as the broader indexes have rallied to all-time highs.

• Investors may want to consider these stocks for their dirt cheap valuations and high yields.

• 10 stocks we like better than United Parcel Service ›

United Parcel Service (NYSE: UPS), Target (NYSE: TGT), and J.M. Smucker (NYSE: SJM) may all be well-known names, but all are down year to date -- markedly underperforming the S&P 500's 6.4% gain. Yet, the sell-off could be a buying opportunity for long-term investors -- especially those looking to give their passive income a jolt -- as all three stocks yield at least 4%.

Here's why these high-yield dividend stocks are worth buying now.

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Tariff resolutions and economic growth could be a boon for UPS

UPS stock has been crushed and is hovering around a five-year low. Industrywide consumer-spending challenges have impacted domestic package delivery volumes. Tariffs, which affect global trade, could slow down the company's international segment, which has been a bright spot for UPS.

The company is making a concerted effort to shift away from high-volume, low-margin deliveries and focus on higher-margin areas to drive growth. The decision includes pulling back from its largest customer Amazon and expanding the temperature-sensitive and time-sensitive delivery of healthcare items.

The move could pay off in the long run, but for now, UPS sales, margins, and free cash flow (FCF) are declining -- and the weak results are straining the company's ability to support its dividend.

UPS Dividend Per Share (TTM) data by YCharts.

As you can see in the chart, UPS was generating explosive earnings and FCF during 2021 and 2022, so it hiked its dividend to what looked like a reasonable level. But FCF and earnings have since been tumbling, and the dividend is now looking unaffordable.

Investors prefer a company that doesn't cut its dividend because it means less passive income. But UPS may be better served by reducing its dividend by a third to 50% so that the payout is more manageable. The dry powder would allow the company to focus on improving the underlying business -- which could help it grow FCF and earnings to justify a future dividend hike.

The good news is that even if UPS cuts its dividend, it will still offer investors a compelling yield, given that the current yield is 6.5%. UPS is also dirt cheap -- sporting a mere 16.1 price-to-FCF ratio and a 14.8 price-to-earnings ratio (P/E).

UPS is a good value stock for investors who are willing to look past near-term challenges in the business. However, it's worth understanding that earnings could take even more of a hit if trade tensions ramp up.

Target's dividend has endured slowdowns before

Like UPS, Target stock is under pressure due to factors both within and outside its control. Retailers have been struggling to navigate inflationary pressures, consumer spending challenges, and tariffs.

Target is leaning into promotions, partnerships, and marketing efforts to boost foot traffic and sales volume, but these efforts haven't been able to offset overall weakness. Target lowered its guidance in its latest quarter, putting the company on track to deliver its third consecutive year of adjusted earnings-per-share (EPS) declines.

Recognizing the need to try something new, Target is creating a multi-year Enterprise Acceleration Office that's tasked with addressing the company's problems -- such as internal processes. The move could make the company more flexible and better able to respond to industry challenges.

Target's lack of flexibility has been a significant problem in recent years, as the company didn't handle supply-chain challenges or inflation well -- leading to bloated inventory followed by steep price cuts, which crushed Target's operating margin.

Despite years of overpromising and underdelivering, Target stands out as an intriguing dividend stock to buy now. The stock yields 4.6% and the company has 54 consecutive years of raising its dividend. In addition to the impressive track record, Target's dividend is affordable, as the company's trailing-12-month earnings are roughly double its annual dividend payment.

Target's stock price is historically cheap when looking at valuation, as measured by its modest P/E, price-to-sales, price-to-book, and price-to-FCF ratios. All told, Target is a good value stock for generating reliable passive income.

J.M. Smucker is out of favor, but the stock is too cheap to ignore

Another industry that's been hit hard by consumer spending pressures is packaged foods. Companies, from J.M. Smucker to Conagra Brands and The Campbell's Company, are at their lowest levels in over a decade. The industry is struggling to offset inflationary pressures with price hikes. But pricing power just hasn't been effective, given that some consumers are making lifestyle changes that include fewer packaged foods.

J.M. Smucker stands out as a good value in the industry. It has several brands that are performing well, such as pet food brands Meow Mix and Milk-Bone, and its popular Uncrustables sandwiches.

What's really dragging down the company is a shakeup in its Sweet Baked Snack segment. J.M. Sucker overpaid when it bought Hostess Brands in November 2023. To try and right the ship, it recently divested brands under its Sweet Baked Snack segment, such as Voortman, to focus on the Hostess lineup.

The transition hasn't been easy, but J.M. Smucker is on the right path, as full-year fiscal 2026 sales are expected to increase 2% to 4% despite the impact of divesting certain Sweet Baked Snack value brands. The company is on track to deliver solid earnings and FCF, as well.

Given the industry challenges, it's understandable why J.M. Smucker stock has sold off so much. But investors are now getting the chance to scoop up shares at a dirt cheap valuation and a high yield -- with the stock fetching a mere 11.4 forward P/E ratio and a 4.4% yield.

Three high-yield stocks at compelling valuations

UPS, Target, and J.M. Smucker may operate in completely different industries. But all three companies are similar in that their stock prices are at multi-year lows, their valuations are dirt cheap, and they have high yields.

All three companies have what it takes to turn things around, but it could take time. Turnarounds are challenging in their own right but even more difficult during periods of industry-wide challenges.

With expectations low, these companies don't have to do much to restore a bit of investor confidence, making them good candidates to buy in the second half of the year.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, J.M. Smucker, Target, and United Parcel Service. The Motley Fool recommends Campbell's. The Motley Fool has a disclosure policy.