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13 July
3 Supercharged Dividend Stocks to Buy if There's a Stock Market Sell-Off

Dividend stocks have historically delivered higher total returns with lower volatility than the broader market. However, that doesn't mean they don't decline during market sell-offs. While some may not fall as much as the major indexes, corrections tend to be widespread.

The good news is that market sell-offs are often opportunities to scoop up high-quality dividend stocks with even higher dividend yields because they move in the opposite direction of stock prices. Given those circumstances, it makes sense to have a watch list of top dividend stocks you want to buy during market sell-offs. Three that should top any list are NextEra Energy (NYSE: NEE), Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP), and Enbridge (NYSE: ENB). They could deliver supercharged income and total returns following a sell-off.

A powerful dividend growth stock

NextEra Energy has delivered superb dividend growth over the years. The leading clean energy-focused utility has increased its payout at a roughly 10% compound annual rate over the last 20 years. It has also delivered healthy compound annual earnings (9%) and operating cash flow (8%) growth over the past two decades. Those catalysts have helped power market-crushing total returns (over 1,700% for NextEra compared to about 600% for the S&P 500).

The utility currently offers an attractive dividend yield of around 2.8%. That's more than double the S&P 500's dividend yield (1.3%). A market sell-off would likely push that yield even higher.

NextEra Energy expects to boost its high-yielding dividend by around 10% annually through at least 2026. This shouldn't be hard to achieve; the company has a low dividend payout ratio for a utility (59% compared to a peer average of 65%) and expects to increase its adjusted earnings at or near the top end of its annual target range of 6% to 8% per share through at least 2027. Meanwhile, given the accelerating demand for renewable energy, it should have plenty of fuel to continue expanding at a healthy rate in the future.

Income and rapid growth

Brookfield Infrastructure has done a terrific job adding shareholder value over the years. The global infrastructure giant has increased its funds from operations (FFO) per share at a 15% compound annual rate since 2009 while lifting its dividend at a 9% compound annual rate. The company has benefited from strong organic growth drivers and acquisitions.

Brookfield currently offers a 4.5% dividend yield. That high yield is mainly due to its dirt cheap valuation. It aims to raise that payout by 5% to 9% annually over the long term.

The company should have no problem achieving that goal. It expects a trio of organic drivers (inflation-linked rate increases, rising volume as the global economy expands, and capital project completions) to increase its FFO by 6% to 9% per year. Meanwhile, it anticipates that accretive acquisitions will boost its growth rate above 10% annually.

Add that to its already attractive dividend yield, and Brookfield should have the fuel to generate robust total returns from here. They'd likely be even higher for those who buy shares during a market sell-off.

A high-octane income stream

Enbridge also has a tremendous record of increasing its dividend. The Canadian utility and pipeline company has raised its payout for 29 straight years. It currently offers a monster yield of around 7.5%.

Enbridge might not be growing very fast these days. However, it's still expanding at a decent rate. It expects its cash flow per share to rise at a 3% annual rate through 2026 and 5% annually after that. That cash flow will allow it to continue raising its dividend.

Several factors fuel that growth forecast. Enbridge has a massive pipeline of secured capital projects that it expects to compete over the next several years. It should also benefit from cost savings from its increasing scale and inflation-linked rate escalators. On top of that, the company has excess investment capacity it can deploy into accretive acquisitions.

Given its already high yield, Enbridge's modest growth rate should still give it the fuel to deliver total returns above 10% annually. Moreover, if shares fall during a sell-off, the returns from that point could be even higher.

Supercharged return potential

NextEra Energy, Brookfield Infrastructure, and Enbridge are already in excellent positions to generate strong total returns in the future. They offer high-yielding income streams and healthy growth profiles. However, they may become even more attractive investment opportunities during a market sell-off because it would likely drive down their stock prices and boost their dividend yields. As a result, they should sit at the top of any income investor's watch list of high-quality dividend stocks to buy during a market downdraft.

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Matt DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Enbridge, and NextEra Energy. The Motley Fool has positions in and recommends Enbridge and NextEra Energy. The Motley Fool recommends 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.