Uncertainty about corporate spending on generative artificial intelligence (AI) continues to weigh on stocks. As markets remain rocky, long-term investors may want to take advantage of the turbulence by buying blue chip dividend stocks on weakness.
Even with just a small amount of starting capital, you can begin building a portfolio that compounds for decades to come.
Dividend stocks, particularly dividend-growth stocks, can serve as a strong foundation for a long-term portfolio. The steady gains from their respective payouts help to provide a solid baseline for returns.
Right now, three such names that stand out as potential buys are Dover Corp. (DOV 3.14%), NextEra Energy (NEE +0.07%), and Roper Technologies (ROP 0.45%).
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Dover's on a roll, thanks to its AI data center boom
Dover is an industrial conglomerate. Think of it as similar to Danaher or Illinois Tool Works. However, two key factors make Dover stand out. First, it's one of the Dividend Kings, or stocks with at least 50 years of consecutive dividend growth.
Dover Corporation earned this status decades back, as it's nearing its 72nd consecutive annual dividend increase. Yes, as a dividend play, Dover is far from a high-yielder. Currently, shares have a forward yield of just 0.9%. Dividend growth, while steady, has been slow, averaging 1% annually over the past five years.
NYSE: DOV
Key Data Points
Still, this dividend stock could still generate strong returns. Lately, Dover's overall growth has benefited from strong demand for the company's liquid cooling systems, driven by the rise of AI data centers worldwide. With profits surging, further dividend growth and price gains could continue to arrive at a rapid pace.
NextEra Energy is another beneficiary of increased AI spending
NextEra Energy, a Florida-based utility company, is yet another "old economy" name with an AI catalyst in its corner. In light of booming energy demand from AI hyperscalers, NextEra has stated that the U.S. is now in "a golden age of power demand."
If NextEra's thesis proves correct, it will bode very well for this longtime dividend growth stock. NextEra Energy has raised its dividend annually for the past 31 years.
NYSE: NEE
Key Data Points
Better yet, dividend growth has averaged 10.1% annually over the past five years. At current prices, the stock has a forward yield of 2.44%. While pricier than peers at 23.5 times forward earnings, this valuation is sustainable if growth trends persist. From there, shares could keep climbing in line with earnings growth.
The recent sell-off creates a unique opportunity to buy Roper Technologies
Roper Technologies sells industry-specific enterprise software products, such as DAT Freight and Analytics for trucking and Deltek Costpoint for federal contractors. While previously a strong performer, shares have slumped lately, falling 37% over the past six months. In recent quarters, sales have slowed down.
NASDAQ: ROP
Key Data Points
AI disruption fears have also placed pressure on the stock. Nevertheless, better times may be just around the corner. Moving forward, Roper's 1.1% dividend yield stands to have a greater impact on total returns. Roper has raised its dividend for 32 years in a row. Dividend growth has averaged 10% annually over the past five years.
More importantly, various catalysts could help drive a rebound, including possible new acquisitions, aggressive share repurchase plans, or even just the potential for Roper to beat walked-back growth expectations.
