How much to invest in Nike stock to earn $1,000 in annual dividends

Investing in quality dividend stocks offers you a chance to benefit from a steady stream of passive income and long-term capital gains.

"Dividends can improve your performance by a third without doing anything," Sam Stovall, chief investment strategist at CFRA, told CNBC . He noted that since 1945, reinvested dividends have made up roughly a third of the S&P 500's total return.

Given this backdrop, let's see if it makes sense to invest in Nike stock right now, which offers a tasty yield of 4.3%.

Given that dividend yields and share prices are inversely related, investors should note that Nike is down 80% from all-time highs and trades at a 12-year low.

Here is what it would take to turn Nike stock into a $ 1,000-a-year dividend paycheck.

Why Nike stock's dividend yield jumped to 4.3%

Nike shares trade around $38.40 today, down almost 80% from the stock's record highs. It is a brutal stretch for anyone who bought Nike stock in 2021.

When a stock price falls significantly while the dividend increases steadily, the yield becomes attractive.

Nike currently pays an annual dividend of $1.64 per share. Divide that by the current share price, and you get a forward yield of about 4.3%.

For context, that is well above what Nike investors have historically collected, and it is a much richer payout than most large consumer brands offer today.

Wall Street is split on whether the stock drop is a buying opportunity or a warning sign. According to a CNBC report:

Truist Securities analyst Joseph Civello downgraded Nike to Hold from Buy in late August, cutting his price target to $42 from $47.

Civello explained that a disappointing update from Dick's Sporting Goods signals incremental murkiness around the footwear giant's turnaround progress.

The analyst said it is best to move to the sidelines until there is more clarity around both the cleanup process.

How many Nike shares do you need for $1,000 in dividends ?

The math here is simple once you have the numbers.

Nike pays $1.64 per share every year. To collect $1,000 in annual dividend income, divide $1,000 by $1.64. That comes out to about 610 shares.

At the current price of $38.40 per share, buying 610 shares of Nike would cost roughly $23,430.

That is the trade-off with a higher-yielding stock like Nike right now. The payout looks attractive, but investors are also buying a company in the middle of a turnaround, not a steady compounder trading near its highs.

Nike dividend ratios investors should watch