Please ensure Javascript is enabled for purposes of website accessibility

3 Dividend Stocks to Buy on Sale

By Matthew DiLallo - Feb 27, 2021 at 10:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These companies offer even more compelling yields following their sell-off over the past year.

Dividend stocks have a long history of enriching investors by providing them with income and the upside from a rising share price. However, sometimes even the best dividend payers hit a rough patch where their shares slump. Those sell-offs have their benefits, as they cause dividend yields to rise.

Three dividend stocks currently on sale are utility Consolidated Edison (ED 0.71%), energy infrastructure giant Enbridge (ENB 0.76%), and office REIT SL Green Realty (SLG 0.39%). Here's why their sell-offs look like buying opportunities for income-seeking investors.

A sale sign on a yellow paper price tag against rustic wood.

Image source: Getty Images.

A well-powered dividend

Consolidated Edison has been one of the most dependable dividend stocks around. The utility, which provides electricity and natural gas to the New York City region, has increased its dividend for 47 straight years. That payout currently yields 4.6%, which is well above the S&P 500's 1.5% average. 

One factor powering Consolidated Edison's high yield is the roughly 25% decline in its stock price since the start of 2020. That slump comes even as the utility generated solid results last year. While its adjusted earnings dipped due to warmer winter weather and some COVID-19 related impacts, those headwinds should fade this year. Because of that, the utility expects its earnings to grow at a 4% to 6% annual pace from this year's level over the next five years. Powering that growth is the continued expansion of its utility operations and its solar energy business, which is the second-largest in the country. As a result, Consolidated Edison should have the fuel to keep growing its dividend for the foreseeable future. 

A fully fueled dividend growth engine

Canadian energy infrastructure company Enbridge also has an exceptional dividend track record. The company has increased its dividend in each of the last 26 consecutive years, which is impressive considering all the volatility in the oil market. Thanks to that boost, and a roughly 10% decline in the stock price since the start of last year, Enbridge's dividend now yields 7.3%.

The company has plenty of fuel to push that payout higher in the future. Enbridge has a multibillion-dollar expansion program underway, fully supported by long-term, fixed-rate contracts. Because of that, it expects to grow its cash flow per share by 5% to 7% per year through at least 2023. Meanwhile, it should have plenty of fuel to keep growing beyond that time frame as it increases its investments in cleaner energy sources that will benefit from the energy transition. It recently began construction on another offshore wind farm in Europe that should start operations by 2024. On top of that, it's working on opportunities to produce, transport, and store alternative fuels like renewable natural gas and hydrogen. Those future investments could give Enbridge the power to continue steadily growing its dividend in the years to come.  

A person holding out their hand with the word dividends written above it.

Image source: Getty Images.

Growing taller in a tough year

Office REIT SL Green Realty battled through a difficult year in 2020 as the pandemic forced many of its tenants to stay away from their offices in New York City, where the company operates. However, most tenants paid rent, enabling the company to generate more than enough cash to cover its 5%-yielding dividend. On top of that, office building values held up relatively well, allowing the company to sell properties at attractive prices and bolster its financial flexibility.

SL Green used this cash to continue paying its monthly dividend that grew for the 10th straight year, pay a special dividend, and buy back its stock following its more than 25% sell-off last year. It has also continued investing in its large-scale development projects in New York City. Those investments should pay dividends over the long-term as businesses return to their office in a post-pandemic world. While there have been concerns that some companies will allow their employees to work from home permanently, most can't wait to get back to the office because it fosters innovation, productivity, and culture. That's why most companies continued to pay rent during the pandemic and kept signing new long-term office leases as they expired. This eventual recovery in the New York City office market suggests that SL Green should continue paying a growing dividend in the coming years.

Lower prices equal higher yields

While most stocks have been in rally mode over the past year, investors have sold off Enbridge's shares due to its exposure to the volatile oil market and SL Green and Consolidated Edison because of their focus on New York City. However, oil has already started recovering, and New York should get a shot in the arm as vaccines continue rolling out. This trio offers high upside when adding up their compelling yields, bounce-back potential, and growth prospects.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Consolidated Edison, Inc. Stock Quote
Consolidated Edison, Inc.
ED
$100.58 (0.71%) $0.71
Enbridge Inc. Stock Quote
Enbridge Inc.
ENB
$46.20 (0.76%) $0.35
SL Green Realty Corp. Stock Quote
SL Green Realty Corp.
SLG
$62.62 (0.39%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.