While it may seem counterintuitive to buy a stock at an all-time high, companies charting a path to higher profits can often justify a record market capitalization. This principle is why the largest US-based companies by market capitalization are as they are Microsoft – have had decades-long expansion periods, with record highs seemingly broken every few years.
Mega-cap growth stocks are undoubtedly responsible for pushing the broader indices to new heights, but there are plenty of market segments enjoying their own rally.
Oil and gas integrated giant ExxonMobil (NYSE:XOM)utility Vistra (NYSE: VST)and home improvement giant Home Depot (NYSE: HD) are three dividend stocks that just hit record highs. This is why three Fool.com contributors picked these stocks as candidates to move even higher.
The bulls are excited about buying ExxonMobil stock, but there’s no reason to think the enthusiasm will wane anytime soon
Scott Levine (ExxonMobil): ExxonMobil is the only supersized stock that has outperformed the S&P500 so far in 2024. In fact, ExxonMobil has remained so attractive among investors this year that they recently drove its shares to an all-time high. And yet ExxonMobil remains worth considering, especially with its dividend, which currently offers a forward yield of 3.1%.
While the 8% year-to-date price increase for U.S. benchmark West Texas Intermediate crude has certainly played a role in the market’s appetite for ExxonMobil stock, the company reported strong financial results in the second quarter of 2024 that also motivated energy investors to buy shares. . For the recently completed quarter, the company reported that the merger with Pioneer is already proving fruitful, contributing $500 million in profit for the quarter. Additionally, the company reported free cash flow of $4.9 billion in the second quarter of 2024, contributing to total free cash flow of $15 billion for the first half of 2024.
While ExxonMobil stock has performed well so far this year, there’s no reason to think it can’t rise further. Should the company continue to deliver strong results from its Permian assets (both those acquired through the Pioneer merger and others), investors may choose to continue fueling their portfolios with ExxonMobil stock – especially as the company will be well positioned to maintain the dividend. which she has raised for 41 years in a row.
Investors are likely to maintain their interest in buying shares of ExxonMobil if the company succeeds in developing growth projects related to alternative energy, which can diversify its business and limit the risk of a decline in oil and gas prices. First, ExxonMobil is working with Air Liquid to develop a hydrogen production facility. The company also collaborates with Tetra Tech to develop a lithium production facility in Arkansas.
AI investments fuel demand for nuclear energy
Lee Samaha (Vistra): Microsoft’s recent 20-year power purchase agreement with Constellation Energy indicates a growing recognition that nuclear energy has a great future. The tech company must secure a long-term, secure energy source for its cloud services data centers as demand for AI-powered applications grows.
The deal will result in the restart of the Three Mile Island nuclear power plant and help Microsoft ensure it meets its emissions targets, as nuclear reactors do not produce CO2 emissions. Furthermore, they provide a regular and predictable energy source without the interruptions of renewable energy.
The Constellation deal reads well for Vistra, as the latter expanded its nuclear capacity this year through its acquisition of Energy Harbor in March. The deal added 4,000 megawatts (MW) of nuclear capacity to the 2,400 MW of nuclear capacity Vistra ended with at the end of 2023. As such, 6,400 MW of Vistra’s total capacity of 40,700 MW will be nuclear.
Optimism over Vistra signing potential deals with cloud service providers has helped the market make Vistra the best-performing stock in the S&P 500 this year. Furthermore, if the optimism proves to be well-founded, Vistra’s long-term earnings and cash flow prospects could have significant upside potential. That would also likely result in a dividend increase (remember, Vistra started the year with a 2.3% yield), in addition to excellent capital returns for investors.
Home Depot is packed with potential
Daniel Foelber (home depot): 2024 has been a wild ride for Home Depot investors. In March, the stock rose year-to-date and was on track to surpass its all-time high set in December 2021. But then Home Depot suffered a brutal sell-off as investors feared that weak consumer spending would impact discretionary purchases like homes. improvement. These fears proved justified, as Home Depot lowered its full-year guidance when it reported second-quarter results in August.
In its earnings release, Home Depot said the reduction was because the company now sees consumer demand in the second half consistent with the first half. In other words, the macroeconomic situation shows no signs of turning around.
So why, investors may wonder, is Home Depot stock up 19% over the past three months? Since the fundamentals haven’t changed, the simplest reason is that investor sentiment has improved, and lower interest rates can help consumers, the housing market, and in turn Home Depot.
Home Depot is the kind of cyclical company that can thrive during a consumer-led economic boom – which we haven’t seen since 2020 and 2021. In fact, Home Depot’s results have been quite poor in recent years – with flattening or slightly declining sales and net profit.
Glass-half-full investors may view Home Depot as a coiled spring that is long overdue for outsized growth. Even though Home Depot isn’t showing any signs of improvement, patient investors can simply hold the stock and let it grow in their valuation. Home Depot has a price-to-earnings ratio of 27.6, which is above the historical average. But keep in mind that the valuation is based on rolling earnings figures. If Home Depot can hit new growth gear and maintain double-digit earnings growth, it could make today’s somewhat pricey valuation reasonable in retrospect.
Additionally, Home Depot has an excellent dividend. The stock yields 2.2% and Home Depot’s payout ratio is just 58.4% – which is healthy for a reliable blue chip dividend stock.
With Home Depot’s best days likely ahead, it wouldn’t be surprising if the stock has plenty of room to run from here.
Should You Invest $1,000 in ExxonMobil Now?
Consider the following before buying shares in ExxonMobil:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and ExxonMobil wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $846,108!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns October 14, 2024
Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no positions in the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Constellation Energy, Home Depot, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
3 Incredible Dividend Stocks That Just Hit All-Time Highs, But Could Have More Room to Run was originally published by The Motley Fool
