It wasn't so long ago that discussions about investments in cryptocurrency were dismissed as ludicrous. People deemed Bitcoin a fad, Ethereum a novelty, and Dogecoin a joke. Nowadays, however, it seems the tide has turned, and institutional investors are taking Bitcoin and Ethereum a lot more seriously. Dogecoin -- well, the verdict's still out.
But investing in these cryptocurrencies isn't for the faint of heart. While they've seen extraordinary gains over the past year, they've also experienced precipitous declines. Amid this volatility, investors who keep crypto among their holdings shouldn't panic. Instead, they should consider fortifying their portfolios with reliable dividend stocks such as Brookfield Renewable (BEP -1.07%) (BEPC -1.33%), Emerson Electric (EMR 0.59%), and Illinois Tool Works (ITW 0.56%).
The clean energy dividend powerhouse
Looking to bring some stability to a portfolio reeling from crypto's crazy ups and downs? Brookfield Renewable certainly fits the bill. A worldwide leader in renewable energy, Brookfield's portfolio of operating assets spans five continents and totals about 21 gigawatts (GW). This high-yielding dividend stock offers a forward yield of about 3%, and management remains dedicated to increasingly rewarding investors, consistently reiterating a target of 5% to 9% annual dividend growth which will be "fully funded by internally generated cash flows," according to a recent investor presentation.
It's not only a high yield that will buttress a portfolio, though -- the company should be well positioned to sustain the distributions to shareholders.
In the case of Brookfield Renewable, investors need not worry. The company primarily operates by signing long-term power purchase agreements, of which the average length is 14 years. Under this business model, Brookfield increased its funds from operations at a compound annual growth rate (CAGR) of 10% from 2010 to 2020, and management forecasts a comparable CAGR through 2025. This insight into future cash flows enables the company to adequately plan for capital expenditures such as completing the 27 GW of projects it has in its pipeline.
Charge up with this regal dividend stock
Uninterested in powering your portfolio with green energy? Perhaps you're more interested in a royal choice like Emerson Electric. In addition to automation, Emerson Electric provides diverse products and solutions that span a swath of industries, from vacuums to food service to transportation.
A Dividend King, Emerson Electric is a stock with one of the longest streaks of increasing its distribution to shareholders -- 64 consecutive years. While there's no guarantee that the company will maintain that streak in the years to come, Emerson has demonstrated a virtually unparalleled ability to grow its return to shareholders, a steady-as-she-goes quality that suggests the stock could bring stability to investors' portfolios.
While many businesses return cash to shareholders via a dividend, plenty of them jeopardize their financial health in order to please investors with the payout. This is hardly the case with Emerson Electric. Averaging a payout ratio of 59% over the past 10 years -- and 57% over the trailing-12-month period -- Emerson Electric has adopted a conservative approach to its dividend. It's not only the company's conservative payout ratio that suggests it's capable of providing stability, it's also the company's impressive ability to generate free cash flow. Emerson generated free cash flow of $2.5 billion in 2020, and forecasts growing this to $2.7 billion in 2021.
A noble name from the Prairie State
While Illinois Tool Works hasn't been coronated as a Dividend King, it still finds itself among distinguished company as a Dividend Aristocrat, growing its dividend for 49 consecutive years. Tracing its history back to 1912, Illinois Tool Works has become an industrials stalwart. The company operates in 52 countries and while it generated 53% of its revenue from the North American market in 2020, Europe, Middle East, and Africa accounted for 27%, with Asia Pacific representing the other 20%.
Starting 2021 off on a high note, Illinois Tool Works reported a company record: $2.11 in earnings per share for the first quarter. This contributed to management providing a 2021 earnings forecast of $8.20 to $8.60 per share. For context, the company reported EPS of $6.63 for 2020. But while the company's performance may have grabbed some headlines, it's management's more recent statement that likely caught the attention of dividend investors.
After the company announced an increase in the distribution for the second quarter of 2021, Illinois Tool Works' stock now offers an annualized dividend of $4.56 per share, representing an increase of more than 3% compared to 2020 and a current forward yield of approximately 2%. And that's not the only way management recently announced its dedication to rewarding shareholders; the company also announced a $3 billion share buyback program.
Like Emerson Electric, Illinois Tool Works has taken a cautious approach to returning cash to shareholders. Over the past 10 years, the company has averaged a 44% payout ratio. If the company achieves the midpoint of its 2021 earnings guidance, investors can expect this to continue as the company will have a payout ratio of about 54%.
Put your portfolio on firm footing with these dividend darlings
For crypto investors in search of stability with solid dividend stocks, Emerson Electric and Illinois Tool Works are worthy considerations. With lengthy histories of returning cash to shareholders, these two companies have weathered plenty of storms in the past and seem well positioned to face future challenges. Consequently, these two companies should be at the forefront of considerations for investors seeking conservative options to mitigate the risk of volatility in their portfolios. Brookfield Renewable, on the other hand, represents a compelling choice for those also looking for stability but with a hint of growth also baked in.