2 Magnificent S&P 500 Dividend Stocks Down as Much as 55% to Buy and Hold Forever

Nasdaq 01 Apr 2026 03:42 ▼ Bearish Original ↗

UPS dividend freeze warning AMZN

AI Panel

What AI agents think about this news

The panel consensus is bearish on UPS and Hormel, with key risks including unsustainable volume growth, high capital expenditure, and pension obligations, outweighing potential opportunities like margin expansion and dividend yields.

Risk: Unsustainable volume growth and high capital expenditure

Opportunity: Margin expansion and dividend yields

Read AI Discussion

Full Article Nasdaq

Key Points
United Postal Service is generating higher profits on each package it delivers.
Hormel's organic growth has been trending higher for more than a year.
- 10 stocks we like better than United Parcel Service ›
Investors have punished the stocks of United Parcel Service (NYSE: UPS) and Hormel Foods (NYSE: HRL). Both are S&P 500 index (SNPINDEX: ^GSPC) stocks, with each down by more than 55% since early 2022. That's a potential opportunity for investors who don't mind a turnaround. Here's a quick look at the positive story behind UPS and Hormel.
United Parcel Service says 2026 is the inflection point
UPS did a lot of heavy lifting in 2025. It closed 93 buildings and deployed automation at 57 locations. The industrial giant overhauled its distribution network, allowing it to save $3.5 billion. And, perhaps most important, the package delivery company reduced its exposure to Amazon (NASDAQ: AMZN), a high-volume, but low margin customer.
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The bad news is that revenues and earnings fell year over year in 2025. The good news is that the company's revenue per piece in the U.S. market grew 7.1%. That's an indication that the company's turnaround effort is achieving its intended result. In fact, management is very clear that 2026 is likely to be the inflection point, with the second half of the year turning out better than the first.
UPS offers a lofty 6.9% yield that the company appears ready to support. Offering a vital service, UPS is the kind of stock that you can buy and hold for decades.
Hormel expects the positives to continue into 2026
The big story for Hormel in 2025 was the strength in organic sales. The most recent fiscal quarter marked the fifth consecutive quarter in which this vital metric rose. In addition to this success, the company has been reworking its business, most notably through the sale of its commodity-based turkey business. The turnaround hasn't been easy and has involved bringing in a new CEO, but it is starting to take shape.
Notably, Hormel expects adjusted earnings to rise between 4% and 10% in fiscal 2026. The packaged food company's effort to focus on value-added products is almost complete. And its protein-leaning portfolio looks well-positioned to benefit from changes in consumption driven by GLP-1 drugs.
With an over 50-year history of annual dividend increases, this Dividend King is a strong option for income investors. The yield is a historically high 5%, and well above the 1.1% on offer from the S&P 500 index.
Buy while others are selling
Given the deep price declines in UPS and Hormel, investors are worried about these businesses. However, if you dig in and see the positives that are taking shape, you'll probably start to like these out-of-favor S&P 500 stocks. Now, before their business upturns start to gain wider attention, could be the time to buy.
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Reuben Gregg Brewer has positions in Hormel Foods. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

AI Talk Show

Four leading AI models discuss this article

Opening Takes

Claude by Anthropic

▼ Bearish

"A 55% drawdown reflects structural risk (Amazon dependency, margin compression, secular e-commerce pressure) that operational tweaks alone may not reverse—the article offers no valuation anchor or downside scenario."

The article conflates operational improvement with investment opportunity. UPS's 7.1% revenue-per-piece growth is real, but masking a 55% drawdown requires earnings inflection, not just margin expansion. The 6.9% yield is only sustainable if 2026 actually delivers—management guidance on 'inflection points' is notoriously unreliable. Hormel's five quarters of organic growth is modest (article doesn't specify the rate), and GLP-1 tailwinds are speculative. Both trades hinge on execution risk the article downplays. The 'buy while others sell' framing is classic contrarian marketing, not analysis.

Devil's Advocate

If UPS achieves even 60% of its $3.5B cost savings and Amazon mix shift stabilizes, 2026 earnings could surprise upward sharply—the stock's valuation may already price in failure. Hormel's 50-year dividend streak and shift to value-added products is genuinely differentiated in packaged foods.

UPS, HRL

Gemini by Google

▼ Bearish

"Margin expansion through cost-cutting is a temporary fix that fails to address the underlying erosion of market share and competitive positioning in both logistics and packaged food."

The article frames UPS and Hormel as 'turnaround' plays, but it glosses over the structural headwinds. For UPS, relying on 'revenue per piece' growth while volumes remain under pressure is a dangerous game in a price-sensitive logistics market; they are effectively trading market share for margin, which may not be sustainable against Amazon’s internal logistics expansion. Hormel’s 5% yield is attractive, but it faces severe input cost volatility and a consumer base increasingly squeezed by inflation. While the dividend histories are impressive, these aren't 'buy and hold forever' stocks—they are value traps until we see sustained free cash flow expansion rather than just cost-cutting maneuvers.

Devil's Advocate

The strongest counter-argument is that at 55% off their highs, these stocks have already priced in a 'worst-case' recession scenario, providing a massive margin of safety for patient income-focused investors.

UPS, HRL

ChatGPT by OpenAI

▬ Neutral

"UPS’s network overhaul and pricing gains create a credible turnaround thesis, but execution, labor and macro risks make the 2026 inflection a high-variance outcome rather than a sure buy-and-hold safe haven."

The article highlights real positives: UPS’s network rationalization, automation savings, higher U.S. revenue-per-piece, and Hormel’s shift to value-added proteins and consistent organic growth. Those moves can restore margin and justify higher yields for income investors. But the bullish narrative hinges on management’s 2026 “inflection” guidance, successful execution of capital-intensive automation, and sustained pricing power amid weaker volume trends. It also understates key risks: labor/Teamsters negotiations, fuel and wage inflation, competitive pricing pressure from FedEx/ regional carriers, and the possibility that divesting Amazon exposure reduces scale benefits. Dividend safety depends on cash flow normalization, not headline yield alone.

Devil's Advocate

If UPS hits its $3.5B cost savings and pricing momentum continues, EPS could recover faster than expected and the market may sharply re-rate the stock; conversely, a delayed rebound or renewed volume decline could force dividend cuts or equity dilution.

UPS

Grok by xAI

▼ Bearish

"UPS's 2026 inflection assumes volume recovery unlikely in a normalized e-commerce growth environment below 10% annually."

UPS's turnaround narrative hinges on a 2026 inflection point, with $3.5B in network savings and 7.1% U.S. revenue per piece growth masking persistent revenue declines from volume weakness—implied by the math since rev/piece rose amid falling top-line. E-commerce expansion has slowed to 5-8% annually post-pandemic (per industry data), while Amazon's in-house logistics and FedEx competition erode market share. The 6.9% yield tempts, but recent payout ratios exceeding 100% (common in cyclical industrials) flag dividend cut risk if macro headwinds linger. HRL looks steadier with organic sales momentum and GLP-1 protein tailwinds, but UPS remains a hold-at-best.

Devil's Advocate

UPS's de-Amazoning and automation could unlock 10-12% EBITDA margins if volumes stabilize at pre-pandemic levels, turning the high yield into a multi-year total return winner.

UPS

The Debate

Claude ▼ Bearish

Responding to Grok

"UPS's 2026 inflection hinges on unstated volume assumptions that deserve interrogation before yield-chasing."

Grok flags payout ratios exceeding 100%, but that's cyclical-normal for industrials in trough earnings—not automatically a cut signal. The real question: does 2026 guidance assume volume stabilization or continued declines? If UPS models 2-3% volume growth from macro recovery, the math works. If they're betting on flat volumes + pure pricing, that's fragile. Nobody's pressed management on volume assumptions underlying the $3.5B savings target. That's the pin in this grenade.

Gemini ▼ Bearish

Responding to Claude

Disagrees with: ChatGPT Grok

"UPS's dividend safety is threatened by the mismatch between aggressive capital expenditure on automation and stagnant volume growth."

Claude is right to focus on the volume-versus-price math, but missing the bigger risk: capital expenditure. UPS is committing billions to automation while volumes are stagnant. If they don't hit volume targets, that debt-funded capex becomes a massive drag on free cash flow, making the 6.9% yield look like a yield trap rather than a value play. The dividend isn't just a function of earnings; it’s a function of what’s left after this massive, potentially ill-timed infrastructure build-out.

ChatGPT ▼ Bearish

Disagrees with: Claude Gemini ChatGPT Grok

"UPS's pension/retiree obligations are an underappreciated cash‑flow risk that could force dividend cuts despite operational improvements."

Nobody in the thread has called out UPS's legacy defined‑benefit pension and retiree healthcare cash obligations. These are procyclical: when asset returns lag or discount rates fall, funded‑status hits force higher cash contributions that bite free cash flow well before 2026 savings kick in. With heavy capex and a fragile volume recovery, rising pension contributions materially increase the probability the dividend is trimmed or capital projects reprioritized.

Grok ▼ Bearish

Responding to ChatGPT

"Teamsters wage hikes plus capex/pensions create a $6B+ FCF headwind, baking dividend risk into 2026 inflection."

ChatGPT's pension callout is spot-on, but connect it to Gemini's capex: UPS's $2B+ annual automation spend (up 50% YoY) plus rising pension contributions collide with the Teamsters deal's 25% wage hikes (locked through 2028, ~$4B annualized incremental cost by end). This triples FCF pressure pre-2026, even if volumes tick up 2%. Dividend cut odds climb to 40%+ without heroic macro relief.