Dividend stocks are proven wealth creators: Stocks of companies that pay regularly growing dividends often beat non-dividend stocks in the long run. Right now, two dividend stocks and one dividend exchange-traded fund (ETF) look particularly attractive, and income investors may even want to double down on them while they still can. This is why.
A promising share with a high return
Brookfield Renewable (NYSE: BEPC)(NYSE:BEP) trades both as units of a limited partnership and as shares of a company. However, US investors may want to purchase the company stock to avoid having to file a K-1 tax form and foreign tax withholding.
However, the question before you buy shares is Why you should buy it. Without beating around the bush, I’ll give you three solid reasons to double down on this dividend stock now: the company’s solid position in a sector with a lot of potential, its growth plans, and the potential dividend growth.
Brookfield Renewable is one of the world’s largest publicly traded renewable energy companies, with operations in 20 countries. That makes it a perfect candidate to benefit from the global transition to clean energy from fossil fuels.
In fact, the company has already mapped out its growth path for the next five years and expects to grow its annual operating resources (FFO) per unit by at least 10% through 2028, driven by its development pipeline, better margins and potential acquisitions. , among other factors. Supported by the FFO growth, Brookfield Renewable expects to increase its annual dividend by between 5% and 9% over the period.
So here’s what you can get if you buy Brookfield Renewable stock today: a 4.6% yield with a potential annual dividend increase of at least 5% per year. That’s an attractive deal, and with the stock up just shy of 5% so far this year and down about 8% in one year despite the recent rally, there’s still time to double down on this great dividend growth stock .
The growth prospects of this stock now look even better
Duke Energy (NYSE: DUK) is one of the largest utilities in the US, providing electricity to 8.2 million customers and gas to 1.6 million people in several states, most of which are also growing jurisdictions such as North Carolina, South Carolina, Indiana, Florida, Kentucky and Ohio. The utility giant’s recent move makes it an intriguing stock to buy now.
Duke Energy sold its unregulated renewable energy business last year to become a fully regulated utility. The company now has a clear growth path: It expects to spend $73 billion in capital expenditures on its infrastructure and clean energy between 2024 and 2028, and then significantly increase its spending to $95 billion to $105 billion between 2029 and 2033. the adjusted to increase Duke Energy’s earnings per share by 5% to 7% through 2028, giving the company room to even grow its dividends over time. Duke Energy hasn’t missed a dividend payment in 98 years.
Duke Energy expects to maintain the current dividend yield of 4% in the long term. That return, combined with the earnings growth that should be reflected in the share price, could deliver double-digit annualized returns for investors who buy Duke Energy stock now. Don’t underestimate the return-generating potential of utility stocks: Duke Energy has more than doubled investors’ money over the past decade.
Dividend enthusiasts can buy this ETF and hold it forever
Because utility stocks can generate such solid returns thanks to steady cash flows and dividends, my next pick is also focused on the utilities sector. However, it is not an individual stock, but rather an intriguing way to gain exposure to a large basket of utility stocks: through the Vanguard Utilities ETF (NYSEMKT: VPU).
ETFs allow investors to purchase a pool of stocks at once. So with one share of the Vanguard Utilities ETF you can gain exposure to 65 utilities, including companies that supply electricity, water and gas, as well as independent energy producers.
These 65 stocks include top sector names such as NextEra EnergyDuke Energy, and American waterworks, to name a few. However, the Vanguard Utilities ETF provides exposure to companies of all sizes in the utilities sector. As of April 30, large-cap stocks made up 31.6%, while medium-cap stocks made up 52.8% of the ETF’s portfolio. NextEra Energy was the top stock, making up 12.35% of its portfolio.
The ETF has generated solid returns in recent years.
The Vanguard Utilities ETF currently yields 3.1%. Now, investors might argue that some individual utility stocks offer much higher returns, so why not buy the stocks that make up this ETF?
The point is that this ETF diversifies your exposure to utility stocks like no other and can therefore protect your portfolio from nasty shocks while providing you with a stable passive income. Notably, the ETF also has a small expense ratio of just 0.10%, meaning costs don’t have much of an impact on your returns.
Utilities typically rely on cheap financing to fund growth. With the Federal Reserve expected to cut rates in the future, the Vanguard Utilities ETF looks like a solid buy right now: You can earn reliable passive income while you wait for capital appreciation from the stock when rates start to cool.
Should you invest $1,000 in the Vanguard World Fund – Vanguard Utilities ETF now?
Consider the following before purchasing shares in Vanguard World Fund – Vanguard Utilities ETF:
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Brookfield Renewable and NextEra Energy. The Motley Fool recommends Brookfield Renewable Partners and Duke Energy. The Motley Fool has a disclosure policy.
3 Top Dividend Stocks to Double Now was originally published by The Motley Fool
