Stock market sell-offs can be challenging times for investors. It’s never fun to see the value of your portfolio suddenly drop. However, challenges can also bring opportunities.
One bright spot in the stock market sell-off is that dividend yields move in the opposite direction of stock prices. Therefore, they often offer the opportunity to capture even more lucrative income streams from a number of top companies dividend shares. Dominion Energy (NYSE: D) And Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP) stand out as great dividend stocks to buy during sell-offs because a big a decline would further increase their already high yields.
Striving for stability
Dominion Energy currently offers a dividend yield of almost 5%. That is well above average, considering that the S&P 500‘S the dividend yield is less than 1.5%.
The utility plans to be current payment rate for the following several years. The company is in the process of selling three natural gas companies so it can… recycle that capital to expand its electric utility business. It is investing $43 billion through 2029 in a variety of projects, including building clean energy generation such as solar projects and offshore wind, while also investing in expanding electricity transmission and distribution infrastructure. These investments should grow Dominion’s earnings per share at an annual rate of 5% to 7%.
Dominion plans to maintain its growing earnings to support its continued growth, which will Also make its dividend more sustainable in the long term by steadily reducing its payout ratio. Once the company has targeted level in the 60% reach, the company plans to resume dividend growth.
With a 5% yield and earnings growth of more than 5%, Dominion already has the power to deliver double-digit annualized returns for years to come. However, a sell-off would allow investors to potential buy stocks with lower valuations and higher yields, which could boost their returns in the subsequent recovery.
Stable growth in the offing
Brookfield Infrastructure’s dividend yield currently stands at over 4%, and the company plans to grow that payout by 5% to 9% annually over the next several years.
Several factors reinforce that view. The company generates 90% of its revenue from regulated rate structures or long-term contracts, and 85% is indexed or inflation-protected. With inflation continuing to rise, Brookfield expects its Funds from operations (FFO) per share to increase by 3% to 4% annually, due to inflation-driven interest rate hikes alone.
Meanwhile, it expects volume growth as the global economy expands, adding another 1%-2% to earnings each year. In addition, Brookfield is investing heavily in capital projects across its global infrastructure platforms, which should add another 2% to 3% to its FFO per share each year.
Those three organic growth engines alone could power the dividend growth plan. However, Brookfield expects its active capital recycling strategy to boost its FFO growth rate inside the double digits. The company regularly sells mature assets and uses the cash to finance profitable acquisitions.
Add the high-yielding dividend to the super-fast growth figures and Brookfield would easy generate total annual returns in the mid-teens. Meanwhile, a sell-off could allow investors to buy stocks even cheaper and lock in higher yields and bigger upside potential of a future recovery.
Taking advantage of a sale can increase your income and returns potential
Dominion and Brookfield Infrastructure all offers attractive total return potential, driven by their high-yielding dividends and visible earnings growth profiles. However, a sell-off would to offer the possibility to buy these dividend stocks at lower prices, allowing you to lock in an even more attractive yield. That higher income stream would increase your total return. Moreover, the upside potential is even greater if stock prices recover from their decline.
That’s why these are both great stocks to invest in. sale Keep an eye on your watchlist now so you’re ready to strike the next time the market takes an unexpected downturn.
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Matt DiLallo has positions in Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners and Dominion Energy. The Motley Fool has a disclosure policy.
2 Supercharged Dividend Stocks to Buy in a Stock Market Sell-Off was originally published by The Motley Fool
