Dividend Dilemma: Cash Out or Hold on Tight to These 3 Stocks at 52-Week Highs?

Stocks to sell

Stocks hitting a new 52-week high is a psychological hurdle for investors. Particularly if a stock has been in the doldrums and now breaks out to a new high, investors tend to want to sell to capture profits. While it may not seem smart to sell stocks at 52-week highs, these stocks are not a good bet.

Whether it’s a feeling of having recouped previous losses or that the stock can’t possibly go higher, investors often sell stocks that reach a new peak. It is seen as a ceiling against which they can’t break through.

Yet studies indicate that stocks at or near their 52-week high continue to go higher. That could be because the stocks are hitting highs due to receiving good news and it will keep driving the business forward. That’s obviously not always the case. Sometimes things have gotten as good as they’re going to get and it is time to get out.

Last month, for instance, I highlighted three stocks at or near 52-week highs that should be avoided. They all peeled back from the peaks after. Harley-Davidson (NYSE:HOG) is now down over 20% from those highs, DoorDash (NASDAQ:DASH) fell 19% and Caterpillar (NYSE:CAT) is off 7%.

Below are three more companies at or near new highs. Let’s see if they are also dividend stocks to sell or ones we might want to hold onto.

Stocks at 52-Week Highs to Sell: Dell Technologies (DELL)

Source: Ken Wolter / Shutterstock.com

Dell Technologies (NYSE:DELL) remains the third-largest PC manufacturer and the segment is the largest revenue contributor to its business, some 59% of total sales, or $48.9 billion last year. Yet servers are an important and growing part of Dell’s operations, too, particularly artificial intelligence (AI)-optimized ones that can run workloads on-premise, in the cloud or at the edge, meaning on PCs, laptops and mobile devices.

Its data center servers work well in smaller sites and though AI opportunities show growth potential, it remains a small part of its business. Dell’s business also saw sales slow across the board. In servers, networking, storage and PCs revenue was down 11% for the fiscal fourth quarter and 14% for the year. Profits, though, surged 91% and 32%, respectively.

Dell Technologies stock continues its slow methodical climb. Shares have tripled from their low point and are up 74% in 2024, with total returns juiced by a dividend that yields 1.2% annually. 

However, all the good news from the past year and what’s to come has been priced into the stock. At 30 times trailing earnings and 37x the long-term estimated earnings growth rate, it’s hard not to see DELL stock as overvalued. Not that the company is bad or its business is broken, rather the shares have just gotten ahead of themselves.

Keurig Dr Pepper (KDP)

Source: Shutterstock

It hasn’t been nearly as smooth of a ride for coffee and soda stock Keurig Dr Pepper (NYSE:KDP) but shares are hitting a new high. Its ready-to-drink (RTD) beverages have been a hit and showed strength in it fiscal first-quarter report. Coffee, on the other hand, which accounts for 25% of total revenue has lagged with segment revenue falling below $1 billion. Lower prices and less volume hurt the business.

Although Keurig Dr Pepper stock jumped after the earnings report and it sits just below a new high, shares are up only 4% over the past year. The dividend yields 2.5% annually. Essentially the beverage stock hasn’t really gone anywhere in awhile, failing to offer investors much in the way of returns for their patience.

Without question Keurig remains the top seller of single-serve brewers in North America but it is going to come under greater competitive pressure. Nestle (OTCMKTS:NSRGY) plans for a big marketing push in the region for its Nespresso machine, both through direct-to-consumer and business-to-business sales. 

There is also the ongoing decline in soft drink consumption that are additional pressures to contend with. It means this will be a case of it being as good as it gets for KDP stock investors.

Wingstop (WING)

Source: Ken Wolter / Shutterstock.com

On the surface Wingstop (NASDAQ:WING) has a lot going for it. Even with elevated chicken prices it remains the affordable protein and Wingstop restaurants offer top unit economics. It also pays a dividend that yields a meager 0.2% annually.

Average unit volume surged 15% to $1,918 from the year-ago period while comparable sales jumped 21% year over year. And the number of stores open at the end of the quarter was 14% higher at 2,279 locations. 

Store traffic is also strong. Location intelligence data specialist Placer.ai says Wingstop is easily beating the fast-casual category with customer visits too. They might not be making lunchtime visits as much as other chains, but evening visits where customers linger longer put the restaurant chain over the top. International expansion is another level of growth to pull, too.

Those are tough numbers to go up against and say sell. Yet inflation is taking a toll on consumers. The National Restaurant Association says 57% of restaurants report a decline in traffic. That could catch up to Wingstop soon as consumers cut back on out-of-home dining. Competition is also pushing their marketing budgets higher, stressing their value proposition in this environment. That could draw customers away as well. And with a single-item menu, a lack of diversity could end up being a drawback.

Wingstop stock is up 160% from its lows and is up 91% over the past year. That’s a long way to come so fast and could mean it is time the market will take a break from chicken wings. Do yourself a favor and drop these stocks at 52-week highs.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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