Shares sold off earlier this week on fears that a major Chinese real estate developer might default on its debt. The market has since recovered as concerns quickly subsided.
However, this week’s brief drop is a good reminder that volatility can come out of nowhere. This is why it makes sense to have a plan of action. With that in mind, we asked some of our backers for the best dividend shares buy during massive market sales. here’s why Eaton (NYSE: ETN), Brookfield infrastructure (NYSE: BIP)(NYSE: BIPC), and Nucor (NYSE: NUE) at the top of their lists.
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Expensive for now
Brewer Ruben Gregg (To eat): I bought Eaton many years ago when the yield was up over 4%. The current yield is a miserly 1.9%. I’ve done pretty well, but to be honest the performance of the company over that time period impressed me even more than the stock market gains. When i added that industrial giant in my portfolio, it was about to integrate a major acquisition that significantly increased its presence in the electrical sector. My thought was that this was a good deal given the growing importance of electricity in the world.
However, since that point, the company has made an effort to pull out of older, lower-margin, slower-growing businesses. This includes LED lighting, hydraulic, and parts of its automotive business, among others. And in doing so, it increased its growth-oriented divisions, acquired complementary businesses and built a electric vehicle division from scratch (bringing together relevant parts of its existing operations). In other words, I saw investing as benefiting from a one-time change for the better, but change for the better turned out to be an ongoing theme.
The stock is not cheap today, noting its historically low level dividend yield. But with a portfolio strongly aligned with the electric future that looks likely to lead the world, it would be a good name to put on a wishlist during a time when Mr. Market becomes irrational again. A return north of 3% would probably be worth the entry price. And you can rest assured that the top management is always hard at work trying to make this great company even better.
A great stock to buy when it’s on sale
Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure has a phenomenal history of growth in shareholder value. Since its inception over ten years ago, Brookfield has generated a total annualized return of 18%.
The company’s success has been fueled by its ability to acquire and build on a large scale Infrastructure platforms. This strategy has steadily increased its cash flow, supporting annual dividend growth of 10%.
The company expects to continue to generate solid results in the years to come. It has significant short-term growth. The company sees its cash flow per share jump by more than 20%. Organic growth and its asset rotation program are at the origin of these prospects. This strategy includes the sale of mature businesses to finance more profitable acquisitions, including its ongoing deal to Inter-pipeline, a Canadian energy infrastructure franchise.
Meanwhile, Brookfield sees significant potential for long-term growth as infrastructure supercycle play. Catalysts such as the need to reduce government and corporate debt, U.S. government infrastructure spending, growth in data infrastructure, and transportation bottlenecks indicate a significant increase in opportunities for business. investment for Brookfield.
Given the company’s track record, this is almost always a good time to buy stocks. However, investors can position themselves for a higher return if they buy during a massive sell-off in the market. This is because they enter at a lower price while blocking a higher price dividend yield than the current 3.7%. For example, investors who bought during the market turmoil of the past year have achieved a total return of 34% in the past 12 months. These factors are why Brookfield should be at the top of every dividend investor’s watch list to be ready to buy in the next market close.
You just can’t ignore the potential of this dividend-paying stock
Neha Chamaria (Nucor): Nucor is a stock that is sure to be phased out in a stock market crash. failed in the stock market crash of September 20. Days like this are exactly when you would want to buy stocks of this dividend aristocrat, who will become a dividend king once he hits his 50th year of annual dividend increase.
Nucor has increased its dividend for 48 straight years now, and in December it will reward you with another raise. I’m sure a dividend increase is coming just because Nucor is pulling full steam this year, having delivered record numbers for its second quarter and on track to declare another record quarter in October. With steel prices hitting record highs, I even expect Nucor’s core steel segment earnings to increase significantly sequentially in the third quarter.
Of course, these are short-term events, but Nucor’s long-term outlook is just as promising, which is why this stock is a buy on a downside. The biggest catalyst on the horizon is President Joe Biden’s infrastructure plan, which, when enacted, is expected to kickstart construction spending and increase demand for key raw materials, steel. As the largest manufacturer of steel and steel products in the United States, Nucor is one of the best infrastructure stocks you can buy right now. And that, by default, also makes Nucor a high dividend stock to buy when the market crashes.
10 actions we prefer over Nucor
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Matthew DiLallo owns shares of Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. Neha Chamaria has no position in any of the stocks mentioned. Brewer Ruben Gregg owns shares of Eaton and Nucor. The Motley Fool recommends units of Brookfield Infra Partners LP, Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.