2 Stocks I’m Buying in May 2024

Blue-chip dividend stocks such as Brookfield Renewable and NextEra remain enticing investments in May 2024.

| More on:

Investing in dividend stocks with a widening earnings base is among the best investment strategies for long-term shareholders. A growing base of cash flows should translate to consistent dividend hikes, enhancing the effective yield over time. Further, investors should also benefit from share price appreciation or long-term capital gains, increasing the cumulative returns in the process.

Here are two such dividend stocks I’m buying in May 2024.

Brookfield Renewable Partners stock

After trailing the broader markets in the last two years, shares of Brookfield Renewable Partners (TSX:BEP.UN) have surged roughly 35% in the past month. Valued at $25 billion by market cap, BEP pays shareholders a quarterly dividend of US$0.355 per share, indicating a forward yield of 5.1%.

BEP is among the largest clean energy companies globally and is positioned to benefit from the worldwide shift towards renewables as countries look to fight climate change.

In the first quarter (Q1) of 2024, Brookfield Renewable reported US$296 million in funds from operations (FFO), or US$0.45 per share, up 8% year over year. It indicates a payout ratio of 79%, which provides the company with the flexibility to target acquisitions and lower balance sheet debt.

Despite an uncertain macro environment, BEP is positioned to increase its FFO by 10% in 2024, which should result in further dividend hikes. Brookfield Renewable first paid shareholders a dividend in 1999. In the last 25 years, the renewable energy giant has raised its payout by 6% annually.

Brookfield Renewable has an operational capacity of 34 gigawatts and is expected to add another seven gigawatts in 2024. Moreover, it has 157 gigawatts of projects in various stages of development, which provides investors with enough visibility while allowing it to grow cash flow and dividends higher.

NextEra Energy stock

Similar to Brookfield Renewable, shares of NextEra Energy (NYSE:NEE) have also trailed the broader markets. In the last two years, interest rate hikes raised the cost of debt significantly for capital-intensive companies part of sectors such as real estate, utilities, and energy.

However, the pullback allowed shareholders to buy the dip and benefit from outsized gains when market sentiment recovered. In the last month, NextEra stock has surged close to 25%, valuing the utility giant at a market cap of US$158 billion.

A key driver of share prices in the past month for NextEra and Brookfield Renewable is the rosy outlook for rising power demand in the United States. After years of marginal power growth, several reports have highlighted that future growth will be driven by multiple industries, such as oil and gas, manufacturing, and technology.

During the Q1 earnings call, NextEra chief executive officer John Ketchum emphasized, “The redomestication of industry in the U.S., supported by public policy, will drive the need for more electricity, and the tech industry is going to need data centers to support the expected cloud capacity demands that come with artificial intelligence  applications.”

Priced at 22.6 times forward earnings, NEE stock might seem expensive compared to other utility companies. However, once interest rates move lower, its adjusted earnings growth should accelerate.

The utility giant has increased its dividends for 30 consecutive years, and its average annual dividend growth rate has been around 11% in the past decade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners and NextEra Energy. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »