In This Article:
Key Points
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NextEra Energy is a dividend stock offering an attractive yield and rapid dividend growth.
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Chevron is a long-term survivor in the oil patch with an attractive yield.
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Enbridge is a reliable, high-yield dividend stock that's focused on changing with the world.
Despite the volatility in the broader stock market, the S&P 500 index (SNPINDEX: ^GSPC) is still offering investors a tiny dividend yield of just 1.3%. You can do much better than that with companies like NextEra Energy (NYSE: NEE), Chevron (NYSE: CVX), and Enbridge (NYSE: ENB), which offer yields as high as 5.8%. Here's a quick look at each of these top dividend stocks as May gets underway.
1. NextEra Energy is a dividend growth machine
NextEra Energy's dividend yield is around 3.3% today, which is more than twice what you'd get from the S&P 500 index. The dividend has been increased annually for three decades. But the real story here is that the annualized rate of dividend growth over the past decade was a huge 10%. Management is projecting that same level of dividend growth to continue for the foreseeable future.
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What's really interesting is that NextEra Energy is a utility, a sector known for slow and steady growth over time. NextEra bucks that trend because it is really two companies in one. The foundation is the company's regulated utility operation in Florida, a state that has benefited from in-migration for many years. The growth engine for NextEra, however, is its large and growing clean energy business. With the shift toward cleaner power likely to play out over decades, there's no reason to expect this dividend growth machine to slow down anytime soon.
2. Chevron knows how to manage the ups and downs
Chevron's dividend yield is 5%. The dividend has been increased annually for 38 consecutive years. The growth rate ebbs and flows over time, but has outdistanced the historical rate of inflation growth over the past decade. That means the buying power of the dividend is increasing. What's special about all of this is that Chevron operates in the highly volatile energy sector.
Chevron is what is known as an integrated energy company, which means that it has operations in the exploration (upstream), transportation (midstream), and chemicals and refining (downstream) segments of the industry.
Results in both the upstream and downstream are highly dependent on volatile commodity prices. But, having exposure to all three segments of the industry helps to soften the ups and downs Chevron experiences. And the company has an impressively strong balance sheet, which allows it to add leverage during weak patches so it can continue to support its business and dividend.