Unlocking Wealth: 2 Undervalued S&P 500 Dividend Stocks to Buy Now

The stock market has experienced a remarkable resurgence in 2024, with the S&P 500 index climbing approximately 20% over the course of the year. However, not every company within the benchmark index has shared in this success. Some promising S&P 500 companies have been pushed down to attractive valuations due to recent pullbacks, and a few dividend-paying stocks have seen their yields rise as a result of these sell-offs.

Uncover Passive Income and Capital Appreciation Opportunities

Nike: A Powerhouse Poised for a Comeback

Nike (NYSE: NKE) has faced its fair share of challenges in the past year, with growth bets in China not paying off as expected and increased competition in the U.S. and Europe creating headwinds. The company's recent guidance update indicated that it expects sales to decline by approximately 10% in the first quarter of its current fiscal year and by the mid-single digits for the full fiscal year.These challenges have taken a toll on Nike's share price, which has declined by roughly 18% year-to-date and is down 50% from its all-time high. However, this presents a compelling opportunity for investors. Despite the near-term obstacles, Nike remains a formidable industry leader with a globally recognized brand and unparalleled infrastructure and distribution advantages.One of the key attractions of investing in Nike right now is its growing dividend. The company's dividend yield has risen to around 1.7%, surpassing the average yield of the S&P 500. Moreover, Nike has a history of consistently increasing its dividend at a rate above the market average. In its most recent hike, the company raised its payout by 9%, and it has increased the dividend by 51% over the last five years and a remarkable 164% over the past decade. Investors can expect Nike to continue this trend of substantial dividend increases, providing a reliable stream of passive income.While near-term dividend growth may not be the sole focus for investors, it is a testament to Nike's financial strength and commitment to shareholder value. More importantly, the company's ability to navigate challenges and return to growth is what makes it a compelling long-term investment. With its unparalleled brand recognition, infrastructure, and distribution advantages, Nike is well-positioned to emerge from its current challenges and deliver significant capital appreciation for patient investors.

Bath & Body Works: A Dividend-Paying Cash Machine

Bath & Body Works (NYSE: BBWI), formerly known as L Brands, presents another attractive opportunity for investors seeking a combination of generous dividends and the potential for capital appreciation. The company, which focuses on the Bath & Body Works brand after spinning off Victoria's Secret in 2021, has seen its sales remain relatively flat over the past three years.While a flattish sales trajectory may not seem exciting, Bath & Body Works offers a compelling investment case. The company boasts some of the strongest profit margins in the specialty retail industry, outpacing even market darlings like Ulta Beauty (NASDAQ: ULTA) and Five Below (NASDAQ: FIVE). Moreover, Bath & Body Works is a highly effective cash machine, converting 9% of its incoming revenue into free cash flow.Despite these impressive financial metrics, Bath & Body Works' shares are trading at a deeply undervalued valuation of just 7.7 times trailing earnings and 0.9 times sales. This low valuation is even more striking when considering that the stock has plummeted by 39% from its 52-week highs and a staggering 61% from its all-time peak.The market's pessimism towards Bath & Body Works presents a unique opportunity for investors. The company currently offers a generous dividend yield of 2.7%, significantly higher than the average yield of 1.5% among S&P 500 stocks. This dividend is well-supported by the company's robust cash flows and is likely to continue growing at a healthy pace.Furthermore, Wall Street analysts are overwhelmingly bullish on Bath & Body Works, with a consensus buy rating and an average price target that is 48% above the current share price. Even short-sellers are staying away from this stock, with only 4.1% of shares sold short, far below the levels seen in other retail stocks like Ulta Beauty and Victoria's Secret.By investing in Bath & Body Works at its current depressed valuation, investors can lock in an attractive dividend yield while also positioning themselves for substantial capital appreciation as the market recognizes the company's underlying strength and potential.