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Bull Market Buys: 3 Dividend Stocks to Own for the Long Run

Motley Fool - Sat Apr 20, 2:01AM CDT

Even if the broader market extends the bull market it is currently in, it doesn't mean you can't find good dividend stocks. You just need to be more selective. If you are a long-term investor looking for buy-and-hold income stocks you should do a deep dive into Chevron(NYSE: CVX), NextEra Energy(NYSE: NEE), and Dividend King Stanley Black & Decker(NYSE: SWK). Here's a quick look at each.

1. Chevron has an industry-leading foundation

Chevron is one of the largest integrated energy majors on the planet. Its business spans from oil production to transportation to processing. And it has a globally diversified portfolio. That diversification helps to soften the inherent volatility of the energy sector. However, there are other companies that have similar businesses, including ExxonMobil(NYSE: XOM). What sets Chevron apart is its financial strength.

A look Chevron's balance sheet shows that its debt-to-equity ratio of 0.12 times is lower than that of any of its closest peers. That's important because during energy downturns Chevron takes on leverage so that it can continue to support its business and its dividend. Simply put, it has more leeway to do that than the competition. It is worth noting that the company has increased its dividend annually for 36 consecutive years and has a fairly generous 4.1% dividend yield. By comparison, the company with the next strongest balance sheet, Exxon, is only offering a 3.1% yield.

2. NextEra Energy is like buying two companies in one

NextEra Energy is one of the largest regulated utility companies in the United States. And it is one of the largest producers of solar and wind power in the world. The company's regulated assets, which include Florida Power & Light, provide a strong, though relatively slow-growth, foundation. The clean energy side is the growth platform. Together they have allowed the utility to increase its dividend at a 10% annualized clip over the past decade, which is huge dividend growth for a utility. Management is expecting that level of dividend growth to continue through at least 2026.

Here's the interesting thing: Both of its core businesses are advantaged. Florida Power & Light has long benefited from migration to the Sunshine State. More customers means more revenue and more opportunity for regulator-approved capital investments. And renewable power has a long runway for growth as the world slowly transitions away from carbon fuels. This side of the business has 36 gigawatts of capacity, with plans to expand that by another 32 to 41 gigawatts by 2026. This combination of businesses has allowed NextEra Energy to increase its dividend annually for 29 years, and this dividend growth stock currently has a historically attractive 3.2% dividend yield.

3. Stanley Black & Decker is out of favor, for now

Stanley Black & Decker is a Dividend King with 56 annual dividend increases behind it. The last couple of years, however, have been very difficult for the company, with adjusted earnings declining from a record $10.48 per share in 2021 to just $1.45 in 2023. Management has been working on a turnaround, which makes this stock most appropriate for more aggressive investors. Notably, however, the shares are down some 55% from their 2021 highs.

That drop has pushed the dividend yield, which is around 3.2% today, up toward all-time highs. The big story is that the cost-cutting, streamlining, and debt reduction efforts are going to start bearing fruit in 2024. The company is projecting adjusted earnings to, finally, start rising again. The current company outlook calls for an adjusted earnings range of $3.50 per share to $4.50 per share in 2024. Backing that up has been a steady improvement in the company's margins. There's still time to jump aboard this recovering Dividend King if you act now.

There are bull market options for all kinds of dividend investors

Chevron, NextEra Energy, and Stanley Black & Decker are just three examples of attractive dividend stocks you can find today. What's interesting about this trio is that they offer different things for different types of investors. Chevron is a high-yield rock in a stormy industry. NextEra Energy is a dividend growth machine in a typically slow-growth sector. And Stanley Black & Decker is a fallen angel that looks like it will start earning back its wings very soon.

Should you invest $1,000 in NextEra Energy right now?

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Reuben Gregg Brewer has positions in Stanley Black & Decker. The Motley Fool has positions in and recommends Chevron and NextEra Energy. The Motley Fool has a disclosure policy.

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