Nike's stock has experienced a significant decline, dropping 81% from its all-time high in late 2021. The company's market capitalization has plummeted from roughly $264 billion to around $51 billion, leading to its removal from the S&P 100 index after 18 years of inclusion. This downturn has pushed Nike's dividend yield up to 4.8%, the highest it has ever been, with the company having increased its payouts annually for 24 consecutive years.
The recent fiscal 2027 first-quarter results showed a 4% year-over-year decline in sales to $11.2 billion. Management expects a high-single-digit percentage revenue decline for the full year, primarily due to ongoing challenges in the Greater China market. The company faces a structural demand problem in China, where local alternatives are gaining popularity over the Nike brand.
Despite the attractive dividend yield, the high payout ratio poses risks, especially given the company's current struggles. While a dividend cut is not expected this year, there is a real risk of a payout reduction in the future. Investors should approach Nike stock with caution, understanding that continued dividend payouts at current levels are a risky proposition.
The Motley Fool Stock Advisor analyst team did not include Nike in their list of top 10 stocks to buy now, suggesting that other opportunities may offer better returns. The team's track record includes successful recommendations like Netflix and Nvidia, which have produced significant returns for investors.