Up Nearly 20% in a Month, Is This Turnaround Dividend Stock Still a Buy in July?

Yahoo

09-07-2025

Usually, corporate dividends and high dividends don't make a good combo, as one of the ways companies try to 'turn around' their business is by cutting costs, and at times, this means cutting dividends as they try to lower their cash outflows.
Additionally, the reason the company needs to 'turn around' in the first place is that it is not performing well financially, which implies that the dividend might be at risk of being cut or suspended altogether.
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However, I believe Nike is one stock that fits into the category of a turnaround dividend stock. The stock has a dividend yield of over 2%, and while that has come down from the 2025 highs amid the nearly 20% rise in NKE shares over the last month, it still looks like a buy. Let's discuss this in perspective, starting with the company's dividend.
While some companies have a well-documented dividend policy, Nike does not have a stated policy on payouts. However, it has increased its dividends for 23 consecutive years and appears to be on track to become a Dividend Aristocrat. The company increased its dividends even during the 2008 Global Financial Crisis and the COVID-19 pandemic in 2020. Despite its earnings taking a blow in recent quarters, the company increased its quarterly dividend by 8% to $0.40 in December 2024.
The dividends have grown at a compound annual growth rate (CAGR) of 10.3% over the last five years, while the CAGR for the past 10 years is slightly above 11%. That looks like pretty decent growth, and I have no reason to believe that the company will cut its dividend anytime soon. Nike's current dividend yield is around 2.1%, which, while not mouthwatering, is well ahead of the 1.3% that an average S&P 500 Index ($SPX) constituent pays.
Meanwhile, while Nike has a healthy dividend yield, the payout should not be the only reason for buying the stock, as it's the bulk of its returns doesn't come from dividends. Nike investors should expect the bulk of their returns from capital appreciation, so it is prudent to look at the stock's forecast.
While multiple brokerages, including Goldman Sachs, Piper Sandler, Citigroup, HSBC, Barclays, and Baird, raised Nike's target price following the company's fiscal Q4 2025 earnings last month, the stock trades at almost the mean target price of $76.63. However, the Street-high target price of $120 is 56.8% higher than the July 7 closing price.
The stock has a consensus rating of 'Moderate Buy' from the 36 analysts covering the stock, but over the last two weeks, it has earned upgrades from HSBC and Argus.
Nike is an iconic brand. However, it has lost some of its sheen due to its relative lack of innovation. Moreover, the company lost out to established brands like Adidas (ADDYY), as well as newer brands like New Balance, Hoka (DECK), and On Running (ONON), as the decision to cut down on wholesale sales backfired and only helped competitors gain shelf space, which eventually ensured a higher share of customer wallets.
Nike is reversing some of its policies and has now doubled down on third-party sellers. It has also started selling on Amazon (AMZN) after quitting the e-commerce platform in 2019.
Here, it is worth noting that Nike pivoted away from third-party sellers for a reason. Having its own channels gives the company more control and helps better connect with customers. Moreover, the pivot helped Nike expand its gross margins. However, soon enough, the strategy took a toll on Nike's sales as its products were not stocked by many third-party sellers.
As Nike starts focusing on third-party sellers, it might not be able to enjoy the kind of margins it did at its peak in early 2022. However, the company now has a two-pronged strategy where it intends to use its direct channel for premium products, which will be higher-margin.
The company's turnaround is showing results, and it should soon return to top-line growth with stable margins. Turnaround-related costs have been a headwind for the last couple of quarters, but during the fiscal Q4 2025 earnings call, CFO Matt Friend said that the quarter 'reflected the largest financial impact' from its Win Now turnaround plan. The company expects the pressure on the top line and margins to start moderating, but sees another 75-basis point of margin impact this fiscal year.
China, meanwhile, remains a structural headwind for Nike as not only is that market not growing as fast as it once used to, but Chinese consumers have increasingly been preferring domestic brands against U.S. rivals.
All said, I believe Nike's turnaround is progressing in the right direction, and the stock might fit into portfolios of dividend investors who crave a mix of both dividend growth and capital appreciation over the medium to long term.
On the date of publication, Mohit Oberoi had a position in: NKE, AMZN. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com