CEO of Motley Fool advocates for dividend and value investments as a cautious approach in the current market climate
Investing in Dividend, Defensive, and Value Stocks for Long-Term Growth
In the current market, experts recommend focusing on dividend, defensive, and value stocks for potential returns that beat the market in the long term. These types of investments offer a balanced approach to portfolio management, providing income stability, defensive qualities, and cyclical value opportunities.
One such dividend stock is Enterprise Products Partners (EPD), a large midstream energy company with over 50,000 miles of pipeline. EPD has increased its dividend for 26 consecutive years, offering a 6.9% yield. With $6 billion of the $7.6 billion in major capital projects coming online this year, investors can expect steady growth in its cash flows and dividends. Moreover, 90% of EPD's contracts have escalation clauses to offset the effects of inflation.
Brookfield Infrastructure is another solid choice, targeting over 10% Funds From Operations (FFO) growth and 5% to 9% annual dividend growth in the long term. Over the past 15 years, Brookfield Infrastructure has grown its FFO per unit by a compound annual growth rate (CAGR) of 15% and its dividend by a 9% CAGR. The company's business is recession-resilient, with nearly 85% of its FFO being contracted or regulated and indexed to inflation.
Dividend stocks with reliable growth, such as Johnson & Johnson (JNJ) and Cincinnati Financial (CINF), provide steady income and a defensive business model. JNJ, a healthcare giant, has increased its dividend for 63 consecutive years, while CINF, a property and casualty insurer, has increased its dividend for 65 consecutive years.
Defensive stocks, like Clorox (CLX) and Johnson & Johnson (JNJ), offer exposure to consumer defensive industries and trade at a discount to intrinsic value, making them appealing in an expensive market for stability and income.
Value stocks, such as Nucor and Texas Instruments (TXN), benefit from cyclical valuation patterns and strong dividend histories. Nucor, the largest and most diversified steel producer in North America, has increased its dividend for 52 consecutive years, despite being a cyclical stock. Trump's imposition of hefty tariffs on steel imports could make Nucor a solid turnaround story.
Investors looking for opportunities "where others aren't looking" may find value in these stocks. By combining growth, yield, and defensiveness, these investments help mitigate risk during high market valuations.
The S&P 500, currently trading at over 25 times earnings, has staged one of its most dramatic V-shaped recoveries since and just hit a record high. However, Nucor is trading at 30% off all-time highs, making it a potential value plus dividend growth stock.
In conclusion, focusing on dividend, defensive, and value stocks can help investors achieve long-term growth by providing income stability, defensive qualities, and cyclical value opportunities.
- For long-term growth, investing in dividend, defensive, and value stocks is recommended by experts in the current market, offering a balanced approach that provides income stability, defensive qualities, and cyclical value opportunities.
- Enterprise Products Partners (EPD), a large midstream energy company with over 50,000 miles of pipeline, is a dividend stock that has increased its dividend for 26 consecutive years, offering a 6.9% yield.
- Brookfield Infrastructure, a company with over 10% Funds From Operations (FFO) growth and 5% to 9% annual dividend growth in the long term, is another solid choice for investors.
- Dividend stocks like Johnson & Johnson (JNJ) and Cincinnati Financial (CINF) provide steady income and a defensive business model, with JNJ increasing its dividend for 63 consecutive years and CINF for 65 consecutive years.
- Defensive stocks, such as Clorox (CLX) and Johnson & Johnson (JNJ), offer exposure to consumer defensive industries and trade at a discount to intrinsic value, making them appealing in an expensive market for stability and income.
- Value stocks, such as Nucor and Texas Instruments (TXN), benefit from cyclical valuation patterns and strong dividend histories, with Nucor, the largest and most diversified steel producer in North America, having increased its dividend for 52 consecutive years.
