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3 Beaten-Down Dividend Stocks to Buy Right Now

By Keith Speights – Aug 23, 2021 at 5:52AM

Key Points

  • Two renewable energy stocks have fallen significantly this year but continue to have tremendous long-term growth prospects.
  • An ancillary cannabis stock has declined due to several issues that should only be temporary.

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These dividend stocks appear to be poised to bounce back.

Some investors like to buy dividend stocks on big pullbacks to lock in higher dividend yields. An even better reason to scoop up these stocks, though, is that they're likely to deliver market-beating gains.

Of course, not every dividend stock that sinks will bounce back. Many of them do, though. Here are three beaten-down dividend stocks to buy right now that should deliver solid growth over the long term.

Note saying Dividends next to roll of $100 bills, calculator, and marker.

Image source: Getty Images.

Two renewable energy stocks ready to rebound

I'm going to cheat just a little bit here. There are two renewable energy stocks that I believe are ready to rebound that are joined at the hip. Brookfield Renewable Corporation (BEPC 0.50%) and Brookfield Renewable Partners (BEP 0.31%) are different stocks but have the same underlying business.

Brookfield Renewable was originally formed as a limited partnership (LP) and traded under the BEP ticker. In 2020, the company set up a traditional corporate structure that traded under the BEPC ticker to enable investors to have an alternative without the tax hassles of an LP.

The two stocks usually move in tandem, although their gains and losses can differ. BEPC has fallen more than 30% from its peak set earlier this year, while BEP is down more than 20%. Their dividend yields differ a little as well. BEPC's yield stands at a little below 3%, with BEP's yield almost 3.2%.

Both stocks should be poised to deliver solid gains going forward, though. Countries across the world are trying to reduce their carbon emissions. This will drive demand for renewable energy sources. Brookfield Renewable ranks as a top global renewable energy supplier with over 20,000 megawatts of capacity.

The company expects to generate average annual total returns of between 12% and 15%, including its distribution. With favorable dynamics for renewable energy and a development pipeline of over 31,000 megawatts of additional capacity, both of the Brookfield Renewable stocks should be winners over the long term.

A cannabis supplier facing temporary headwinds

Scotts Miracle-Gro (SMG -0.30%) has been a household name for decades thanks to its consumer lawn and garden products. In recent years, though, the company has also positioned itself as the leading supplier of hydroponics products to the cannabis industry. It offers a reliable dividend that currently yields 1.7%.

The stock is nearly 40% below its high from a few months ago. CEO Jim Hagedorn explained why in Scotts' second-quarter conference call earlier this month, stating that the company was "finally at the inflection point everyone knew was coming."

Hagedorn acknowledged that Scotts faces more challenging year-over-year comparisons. The company's consumer and cannabis businesses soared in 2020 due to the COVID-19 pandemic. However, consumers are now returning to their normal routines.

In addition, Scotts has encountered other headwinds. Hagedorn blamed adverse weather conditions for constraining the company's growth. He noted that snow in some key markets on Mother's Day weekend, which is typically the biggest weekend of the gardening season, hurt sales. Much of the Midwest and the northeast U.S. experienced record cold on Memorial Day. Heat and drought out west negatively affected Scotts' business as well.

The company's margins have also been pressured due to rising commodity prices. Scotts has been affected by higher prices for urea, diesel, and resin. Grass seed prices have also soared.

There's good news, though: These should be temporary issues. Scotts will move past the difficult year-over-year comparisons. The weather won't always be bad. Scotts will be able to pass on higher commodity prices by increasing its own pricing.

Even better, Scotts' growth prospects remain very good. The U.S. cannabis market continues to expand. It's possible that federal cannabis reform could provide an even greater boost to the cannabis industry. Like Brookfield Renewable, Scotts is a beaten-down dividend stock that isn't likely to remain beaten down for too much longer.

Keith Speights owns shares of Brookfield Renewable Corporation Inc. and Brookfield Renewable Partners L.P. The Motley Fool owns shares of and recommends Scotts Miracle-Gro. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Scotts Miracle-Gro Stock Quote
Scotts Miracle-Gro
SMG
$55.55 (-0.30%) $0.17
Brookfield Renewable Partners L.P. Stock Quote
Brookfield Renewable Partners L.P.
BEP
$29.20 (0.31%) $0.09
Brookfield Renewable Corporation Inc. Stock Quote
Brookfield Renewable Corporation Inc.
BEPC
$32.32 (0.50%) $0.16

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

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