3 Magnificent Dividend Stocks Down 15% to 64% to Buy and Hold for 20 Years

This is a great time to consider adding quality dividend stocks to your investment portfolio. Recent headwinds in the economy have weighed on sales of leading retail and consumer goods brands, and this has driven their stocks down and their yields higher.

While the near term could be rocky, investors who buy the following dividend stocks today could build up a rewarding stream of passive income for years to come. Here's why three Fool.com contributors believe Target (NYSE: TGT), Starbucks (NASDAQ: SBUX), and Home Depot (NYSE: HD) are great dividend stocks to buy and hold for the next 20 years.

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Target stock: 64% off its highs

Jennifer Saibil (Target): Target is a great example of a company that's rebounded from challenges and gone on to soaring heights. It's in the dumps right now, but it's been there before. In fact, it was struggling right before the pandemic, and it invested in a robust omnichannel strategy before it was fashionable and just in time to benefit from a huge acceleration in e-commerce. Throughout its current struggles, its digital channels, including same-day and pickup services, continue to enjoy strong growth. That should give investors some confidence that it can rebound again under better conditions.

There are several reasons Target is under pressure today. Grocery, which as a category does well under most conditions, isn't as large a segment for Target as it is for some of its competitors. As customers have pulled back on discretionary purchases due to inflation, sales growth has been slow or non-existent, and it's had to mark down items to get them off shelves, cutting into its margins. It's been the target (no pun intended) of several politically based consumer boycott efforts, which cut into recent sales, and all of these things have led to reduced consumer confidence in Target. Now there's the looming threat of tariffs, which had some impact on Target's business in the 2025 fiscal first quarter (ended May 3), and are creating uncertainty about the near future.

Comparable sales dropped 3.8% from last year in the first quarter, although operating income increased 13.6%. Same-day delivery increased 35% year over year, driving a 4.7% increase in comparable digital sales. This is where Target shines, even now.

The future may be uncertain, but Target has a lot going for it in its nearly 2,000 stores, robust membership program, and strong digital channels.

It has something else that investors love even today, and that's its dividend. Target is a Dividend King, and it has raised its dividend annually for the past 53 years. That's an elite class of dividend stocks that are reliable for passive income growth. Plus, at the current low price, Target's dividend yields a very attractive 4.6%, or more than 3 times the S&P 500 average. That's a great reason to buy it today.

Starbucks stock: 31% off its highs

John Ballard (Starbucks): Starbucks is one of the most ubiquitous consumer brands, with over 40,000 stores open worldwide. While it is currently navigating a challenging sales environment, it generates healthy margins that fund generous dividend payments to shareholders. The stock could deliver excellent returns from these lower share prices.

Weak sales and earnings results have sent the stock down 31% from its previous peak. Comparable store sales were down 1% year over year in the most recent quarter. Investments to support the company's turnaround efforts are compounding the declines on the bottom line, with earnings down 50% over the year-ago quarter.

The good news is that Starbucks has a new CEO focused on returning the company to growth. Brian Niccol came over from Chipotle Mexican Grill last year, and his strategy centers around improving the customer experience and better managing costs, which should continue to fuel Starbucks' dividend for years to come.

The recent decline in earnings has raised the payout ratio to 85% on a trailing-12-month basis. Companies can't sustainably pay out over 100% of their annual earnings without risking a reduction in the dividend payment. However, the recent decline in earnings should be temporary, as Niccol has a great record from his time at Chipotle in expanding margins and growing earnings faster than revenue. Management's cost discipline should lead to the same outcome for Starbucks.

The current quarterly payment of $0.61 brings the forward dividend yield to an attractive 2.82% -- the highest yield Starbucks stock has offered in years. Investors who buy today and hold for the next few decades should have a very rewarding income investment, and a stock that is trading at a much higher price.

Home Depot: 15% off its highs

Jeremy Bowman (Home Depot): Home Depot is one of the best-performing stocks of all time. The home improvement retailer went public early in its history when it only had a handful of stores and it has grown to dominate the industry, operating in a duopoly with Lowe's.

More recently, the stock has struggled. Over the last three years, the stock has underperformed the S&P 500, gaining 19%, compared to 42% for the broad-market index.

That's primarily due to a slowdown in the housing market as the lock-in effect from low rates during the pandemic and a jump in mortgage rates since then has cooled off demand. As a result, the company's growth has stalled.

Comparable sales in the first quarter fell 0.3%, though overall revenue increased 9.4% to $39.9 billion due to its acquisition last year of building materials distributor SRS Distribution.

No one knows when mortgage rates will fall again, but there's a housing shortage in the country that is estimated at around 4 million homes, which should eventually support demand for home improvement materials and drive a new cycle of growth at Home Depot.

In the meantime, investors can capitalize on Home Depot's dividend as the retailer has long been an attractive dividend growth stock. As the chart below shows, the dividend has nearly quadrupled over the last 10 years.

HD Dividend data by YCharts

Currently, Home Depot offers a 2.5% dividend yield, and its quarterly payment is likely to continue to grow as the company has now raised its dividend for 16 years in a row.

Despite the near-term challenges the company faces, Home Depot has everything you could want out of a dividend stock. It's an industry leader. It has a long track record of growth, and it has an affordable valuation. It's likely to reward any investor who holds it for the next 20 years.

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Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has positions in Chipotle Mexican Grill, Home Depot, Starbucks, and Target. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Home Depot, Starbucks, and Target. The Motley Fool recommends Lowe's Companies and recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.