Nike (NKE) stock has whipsawed this year, and so has its dividend yield. The stock fell to a multi-year low last month after yet another disappointing earnings report. Given the inverse relationship between dividend yield and stock price, Nike's dividend yield rose to an all-time high last month, approaching 5% at its peak. However, Nike stock has recovered from its 2026 lows, and the dividend yield has fallen to around 4.2%. It is, however, still over three times what the average S&P 500 Index ($SPX) constituent pays.
In my previous article, I noted that the plunge in Nike stock was a good buying opportunity. With the stock recovering smartly from those levels, let’s explore whether NKE remains an attractive investment.
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Why Has NKE Stock Risen from Its Lows?
To begin with, let’s examine why Nike has rebounded from its lows. First, the stock was quite cheap at its lows, attracting bargain hunters and value investors. Despite all its woes, Nike remains a formidable brand, and many investors bought the dip in anticipation that its turnaround is in its final stages.
Second, as the artificial intelligence (AI) trade weakened, investors’ attention shifted to other stocks. There was a rotation into other sectors, particularly consumer discretionary. For context, the US Consumer Services iShares ETF (IYC) has gained 7.8% over the last month versus the 2.4% decline in the S&P 500 Index.
www.barchart.comNike’s Sales Are Falling Despite Turnaround Actions
Analysts have generally turned incrementally bearish on Nike this year, but last month Barclays raised the stock’s target price from $37 to $45. The brokerage said Nike stock was close to bottom even though it sees it remaining rangebound amid its growth woes.
Notably, Nike has been struggling for growth despite taking actions to mend relations with wholesalers — a channel it previously overlooked to focus on direct sales. The company is also back on Amazon (AMZN) after having quit the platform in 2019, citing concerns about the proliferation of fake goods.
Despite these actions, its volumes have been falling, and there looks to be no respite soon, with the company guiding for sales to fall in high single digits in the current quarter. The can has been kicked down the road when it comes to top-line growth, with the deepening slowdown in the Greater China market only complicating the picture.
www.barchart.comIs Nike Stock Still Attractive After the Recent Rally?
Nike is ultimately a play on its turnaround and prospects of the company returning to growth. I previously exited Nike amid its sales woes but bought the post-earnings dip last month. With the stock jumping from those lows, I believe the margin of safety is much lower in Nike now, particularly as the consumer spending environment remains tepid globally, due to inflation triggered by high gas prices.
Nike’s dividend yield is still tempting, and the company has termed dividends a “top priority” despite the payout ratio expected to top 100% for the second consecutive year. However, unless you really crave dividends, Nike’s risk-reward is not looking too attractive to “buy” the stock here.
There could be a near-term trigger as Nike is scheduled to hold its Investor Day event later this month, but I would use any further gains in NKE to book profits, as I believe gains would be harder to come from here, at least in the near 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. For more information please view the Barchart Disclosure Policy here.
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