Retailers aren't the only ones marking down prices heading into Black Friday. The stock market has been having a nearly year-long sale, with prices getting cheaper almost every month. Because of that, investors can scoop up some real bargains this Black Friday.
There's a lot of high-quality merchandise on sale right now. Three top-notch dividend stocks Fool.com contributors believe are great bargains right now are Stanley Black & Decker (SWK 0.95%), Brookfield Renewable (BEPC 4.96%) (BEP 4.54%), and Enterprise Products Partners (EPD 0.18%). Here's why they think investors should take advantage of their sale prices to scoop up some shares along with their other Black Friday shopping this year.
In the discard bin
Reuben Gregg Brewer (Stanley Black & Decker): There's no nice way to say it, tool giant Stanley Black & Decker is doing lousy right now. The company started 2022 expecting adjusted earnings to fall between $12 and $12.50 per share. By the third quarter, that range had fallen to $4.15 to $4.65 per share. It's little wonder the stock is down nearly 60% so far this year.
As an industrial stock, Stanley Black & Decker's business is inherently cyclical. That's compounded by the fact that the company's tools are also sold into the consumer market, an area that tends to pull back more quickly than businesses. So this rapid falloff isn't shocking and has only been exacerbated by the rapid rise in inflation, which has increased costs at a particularly inopportune time. The thing is, management isn't ignoring the problems.
For example, the company is working on a $2 billion cost-cutting plan. It has made the difficult decision to slow production so it can clear out older, more costly inventory. This will hurt near-term results, but should lead to stronger performance in the future. The company continues to focus on innovation, particularly in the battery space. And it has been using non-core asset sales to strengthen its balance sheet. Results look ugly today, but Stanley Black & Decker is laying the foundation for a much better future.
If you can see the silver lining on the clouds here, the stocks' historically high 4% or so dividend yield, backed by over 50 years of annual dividend hikes (which makes it a highly elite Dividend King), is worth a deep dive.
High-powered growth at a much lower price
Matt DiLallo (Brookfield Renewable): Shares of renewable energy juggernaut Brookfield Renewable have tumbled more than 25% from their peak earlier this year. That sell-off comes even though the company is having an exceptional year. Its funds from operations (FFO) were up 15% per share in the third quarter, powered by strong energy resources in the period, development projects, and recent acquisitions. Meanwhile, the company continues to secure a wide range of new investment opportunities to drive future growth.
Brookfield Renewable has gotten much cheaper this year, with its FFO heading higher and its stock price falling. It trades at less than 20 times its FFO and has a 4% dividend yield. That's a bargain valuation, considering the company's high-powered growth prospects.
Brookfield sees a quartet of growth drivers powering up to 20% annual FFO-per-share growth through 2027. These catalysts include inflation-linked contractual rate escalations, higher power prices, development projects, and merger and acquisition activities. The company has already secured and funded 8% annual growth during that time frame. That easily supports the company's plan to grow its dividend at a 5% to 9% yearly rate.
Meanwhile, it continues to pursue additional opportunities to drive growth toward the higher end of its outlook. For example, it recently offered to buy Australian energy company Origin Energy to speed up its transition to clean energy. Brookfield sees a once-in-a-generation investment opportunity in energy transition investing, which could help supercharge its growth in the coming years.
Dividend investors are getting a lot of growth for a bargain price. Add Brookfield's higher yield to the mix, and the company could produce powerful total returns in the coming years.
A reliable stock for uncertain times
Neha Chamaria (Enterprise Products Partners): A steady stream of dividends can come in handy during uncertain times, which is why buying rock-solid dividend stocks is one of the best uses of your money during a stock market dip. One dividend stock that has consistently grown its dividend and offers a high yield right now but still looks cheap is Enterprise Products Partners.
Enterprise Products' stock is trading at only around 7 times cash flow and yielding a hefty 7.6%. Although the stock price has fallen in recent months, dividend growth has also helped support that yield.
Enterprise Products has increased dividends every year for 24 consecutive years now, and has grown it at an impressive compound annual rate of 7% during the period. Credit largely goes to a huge energy infrastructure business that generates the bulk of its cash flows under fee-based, long-term contracts. It's a steady cash-flow-generating business profile, one that has survived the worst of oil and gas market turbulence. If a company can generate steady cash flows and grow them over time, it can also afford to pay out regular, even larger, dividends year after year.
Enterprise Products is on solid footing right now, with high liquidity, manageable debt, and projects worth nearly $5.5 billion under construction. With the company's distributable cash flow also comfortably covering dividends by almost 1.8 times during the first nine months of 2022, investors can safely expect another dividend hike from Enterprise Products in 2023 while they enjoy its high yield. That makes the stock a great deal right now, more so amid the ongoing volatility in oil prices. In times like these, owning a proven, high-yield midstream oil stock should pay off.
