However, some dividend stocks should thrive no matter who wins the upcoming election. Are at the top of this list Nucor (NYSE: NUE), Brookfield renewable (NYSE: BEP)(NYSE: BEPC), and Honeywell International (NYSE: YOU). That’s why they look like the best dividend stocks to buy before voting.
Building the US infrastructure
Reuben Gregg Brewer (Nucor): One of the rare areas of consensus in the country today is the need to improve US infrastructure. That could lead to major construction projects no matter who is in the White House in January 2021. And if you build any material in this country, Nucor, the largest and most diversified steel maker in the United States, is likely on the supplier shortlist.
From an investment perspective, Nucor has a 47 year history of annual dividend increases and currently offers a fairly generous 3.3% return (compared to a less than 2% return you get from one S & P 500 Index Funds). With a modest leverage ratio of 0.4 and interest coverage of around 7.5, the balance sheet backing this payment is absolutely solid. The modern mini-arc mills from Nucor offer the option of starting up and shutting down more easily than older blast furnace technologies.
To be fair, Nucor’s stock, which uses dividend yield as a crude valuation measure, isn’t exactly cheap. In fact, the yield is in the middle of the road for the past decade. But paying a fair price for a great company is usually a good call, and Nucor is in the middle of an extensive investment plan designed to help fuel growth over the next several years. Even if there isn’t an infrastructure boom, Nucor should still do pretty well.
Strong dividend growth no matter who wins in November
Matt DiLallo (Brookfield Renewable): Renewable energy Giant Brookfield Renewable has enriched dividend investors over the years. Since 2000, the company has increased its payout at an average annual growth rate of 6% and is currently generating an above-average return of 3.6%. That payout is one of the most solid foundations in the energy sector thanks to Brookfield’s world-class balance sheet and contracted cash flows.
What’s special about this payout is that Brookfield has enough power to keep building it, regardless of who wins the election. Thanks to a trio of organic growth drivers, Brookfield has better vision for the future and expects cash flow to grow 6% to 11% annually during the next president’s tenure. One factor that drives this outlook is his increasingly bright solar development program. In addition, Brookfield believes that multi-billion dollar acquisitions can be made during this time, which could result in another 4% to 5% annual increase. Because of this, the company expects to adequately execute on its plan to increase its high-yield payout by 5% to 9% per year.
While a greener Biden administration could enable Brookfield Renewable to grow faster, it has enough power to continue to thrive if Donald Trump wins re-election. Because of this, it’s one of the best dividend stocks to buy ahead of the election as it’s going to win over the next four years regardless of who sits in the White House.
A reflection of the modern economy
Daniel Foelber (Honeywell International): Over the past 20 years, Honeywell has grown into an industrial giant with a diverse business model that can thrive independently of the Oval Office. Since Honeywell bottomed out at the height of the COVID-19 pandemic in late March, it has risen nearly 70% and is now within striking distance of a new all-time high.
Like other industrials, Honeywell is vulnerable to market cycles, but its long-term success more than offsets short-term volatility. During the second quarter, which was one of the most challenging quarters for industrial companies, Honeywell recorded 19% lower sales and free cash flow (FCF) of $ 1.3 billion compared to $ 1.5 billion for the same period last year .
Honeywell’s FCF forms the foundation for the company’s sustainable and growing dividend. The dividend payment has more than doubled in the last 10 years, but is still within the scope of the FCF’s capabilities.
Honeywell can then use its extra cash to pay off debt and maintain its healthy balance sheet. Although Honeywell is the third largest US industrial stock by market capitalization, Honeywell has the smallest net debt of any top 10 US industrial stock.
The company’s investments in aerospace, construction real estate, oil and gas, and more make it representative of the wider economy. Honeywell Forge’s technical focus, a data collection and management system, combined with its diverse portfolio, is one reason the stock was replaced Raytheon Technologies as one of the newest members in the Dow Jones Industriedurchschnitt. Honeywell is delivering 2.2% at the time of this writing.