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Do you have $200? 2 Dividend Growth Stocks to Buy and Hold Forever

Looking for dividend stocks to add to your portfolio that won’t break the bank? Even with just $200 to invest, there are plenty of options to consider. But if you want to buy and hold for a long time, perhaps even forever, you have to be very selective.

If that sounds like you, there are two stocks you’ll want to spend some time getting to know NextEra Energy (NYSE: NO) And Partners for business products (NYSE:EPD). This is why.

1. NextEra Energy is out of favor for the time being

NextEra Energy’s dividend yield is around 3.2%, which is slightly below the average utility, based on Vanguard Utilities Index ETF as a proxy. But don’t dismiss the stock just because of that: NextEra Energy’s yield is near its highest level in the past decade, suggesting it’s on a sell-off today.

A person holding a piggy bank with a thoughtful or questioning expression on his face.

Image source: Getty Images.

The next most important number here is dividend growth, which has averaged a solid 10% per year over the past decade. And management expects the dividend to grow at that rate through 2026. If you’re looking for a balance between dividend yield and dividend growth, NextEra Energy is the kind of company you want in your portfolio.

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The company is now two-in-one. At the heart of the story are NextEra Energy’s regulated utilities, which largely consist of Florida Power & Light. This is a slow and steady business that has long benefited from a growing customer base thanks to immigration to the Sunshine State. The other part of the company is a fast-growing renewable energy business, powered by long-term purchasing contracts. Although it is the smaller of the company’s two businesses, NextEra Energy hopes to as much as double its clean energy capacity by 2026.

2. Enterprise Products Partners delivers high revenue and distribution growth

Master Limited Partnership (MLP) Enterprise Products Partners’ distribution yield is as high as 7%. The distribution has been increased annually for 25 years in a row. The core of the business here is the energy infrastructure, such as pipelines, that allows Enterprise to charge usage fees. In other words, demand for oil and natural gas outweighs the price of the raw materials flowing through Enterprise’s vast North American energy infrastructure network. This is a reliable company in an inherently unreliable industry.

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That said, distribution growth won’t be as fast as you’d expect from a company like NextEra. Over the past 25 years, Enterprise distribution has grown 7% annually, but recently mid- to low-single digits have become the norm. That’s probably all investors should expect going forward as well. The big yield will probably make up the lion’s share of your returns. However, if you’re a dividend investor trying to maximize income from your portfolio, that’s probably fine.

The strength of distribution will therefore be of greater importance. In that respect, Enterprise is holding up very well. It has an investment-grade balance sheet, its distribution was covered 1.7 times by distributable cash flow in 2023, and its debt load is modest compared to peers.

One for growth and one for returns

While both are very well-managed entities that you can comfortably own for years to come, there is a clear and major difference between NextEra Energy and Enterprise Products Partners. While both will reward you with regular increases in the income they produce, NextEra Energy is more of a dividend growth investment and Enterprise Products Partners is more of a high-yield play. At least one will probably be attractive to you, if not both.

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Should you invest $1,000 in Enterprise Products Partners now?

Before purchasing shares in Enterprise Products Partners, consider the following:

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Do you have $200? 2 Dividend Growth Stocks to Buy and Hold Forever was originally published by The Motley Fool

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