Volatility has ruled the day in 2020. The stock market nosedived in March as the COVID-19 outbreak caused governments to restrict travel and close certain businesses to slow the spread. The market went on to stage an epic recovery before hitting some turbulence this month. 

While no investor likes stock market crashes, they happen with regularity, which is why investors should always plan for the next one. With that outlook in mind, we asked some of our contributors what dividend stocks top their buy list for the next market meltdown. They're most eagerly awaiting another opportunity to buy shares of Caterpillar (NYSE:CAT), Nucor (NYSE:NUE), and Brookfield Infrastructure (NYSE:BIP)(NYSE:BIPC). Here's why they think these three stand out as great buys when the market starts tanking. 

A person looking at a stock market chart going down.

Image source: Getty Images.

Take advantage of volatility and fear

Daniel Foelber (Caterpillar): Caterpillar is a leader in industrial equipment manufacturing for many industries, most notably construction, oil and gas, and mining. Considered an economic bellwether, Caterpillar's quarterly results tend to ebb and flow with the broader economy. This means there have been, and will likely continue to be, many opportunities to buy shares of Caterpillar at a discount.

CAT Revenue (Annual) Chart

CAT Revenue (Annual) data by YCharts

One of the most attractive qualities of Caterpillar is its resilient and increasing dividend. Caterpillar has increased its dividend for 26 consecutive years -- earning it a spot on the esteemed list of Dividend Aristocrats. This consistency provides a nice reprieve from Caterpillar's often volatile stock price. Caterpillar currently yields 2.7%. 

Investors can use Caterpillar's volatility to their advantage by buying the stock during broader stock market crashes and holding it over the long term. But if you panicked and sold Caterpillar six months ago when the market was in dire straits, you missed out on the stock's epic 50% increase, nearly double the rise of the S&P 500 during that time.

It's worth noting that Caterpillar's balance sheet has weakened as a result of rising debt issuances during the COVID-19 pandemic, but Caterpillar's increased liquidity and suspension of share buybacks should be able to keep its balance sheet at manageable levels. 

Caterpillar's stock can move a lot in both directions over the short term. Like other industrial stocks, it will probably fall hard during the next stock market crash, during which fearful investors will sell and patient investors will buy. History shows it's better to be part of the second group.

Buying the best when it goes on sale

Reuben Gregg Brewer (Nucor): As far as steel companies go, Nucor might be the best-run mill on planet Earth. There are a plethora of reasons why. For example, it uses modern electric arc mills that are easier to ramp up and down through the cyclical industry's peaks and valleys than older blast furnace technology. It has long operated with a very low level of debt, which allows it to invest in downturns, so it exits a stronger competitor. It is one of the most diversified mills in North America, built on a vertically integrated business model. And it has dedicated employees that are happy with the company's profit sharing arrangement, which provides above average salaries in good years but reduces salaries in bad years, giving Nucor a break when it most needs one. There's a lot in there, but you get the idea: Nucor is a great company.

NUE Dividend Yield Chart

NUE Dividend Yield data by YCharts

Investors are well aware of these facts, however, and Nucor's stock often trades at a premium to its peers. The one time when investors forget just how great a company it is, however, is when fear is running high on Wall Street. In downturns, especially when they happen during a recession, Nucor's stock can fall fast and hard even though it is built to weather harsh market conditions. For example, in the early 2020 bear market the stock's yield spiked over 5% (it is currently around 3.5%). That was a terrific buying opportunity in a stock that has increased its dividend annually for 47 consecutive years. The next time investors get spooked about Nucor, you just might want to take the other side of the trade.   

Built for turbulent times

Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure has a durable business model. The company owns high-quality infrastructure assets in the energy, utility, transportation, and data sectors that generate sustainable cash flows backed by long-term contracts with limited volume and pricing risk. Because of that, there isn't much variability in its cash flow, making its dividend -- which currently yields 4% -- very recession-resistant.

Meanwhile, the company complements its stable operations with a conservative financial profile. It boasts having a strong investment-grade balance sheet and a healthy dividend payout ratio. Those factors give it lots of cushion to continue paying dividends during challenging times and the flexibility to take advantage of market turbulence.

That was the case earlier this year when the COVID-19 outbreak sent the stock market spiraling lower. While many investors were panic selling, Brookfield was strategically putting capital to work. In early May, the company reported that it had invested $220 million during the market crash into a handful of public companies. While it hoped those investments would lead to larger-scale transactions, it could also sell those stakes into a recovery and earn a nice return. The company would go on to exit several positions by early August, pocketing a quick $25 million profit. Meanwhile, it also continued accumulating positions in a handful of other companies it still hopes will yield a bigger deal in the future.

With a durable dividend and a business built to take advantage of market turbulence, Brookfield Infrastructure is the ideal stock to buy when the stock market takes a nosedive, since it usually comes out stronger on the other side.