Got 0? 2 Dividend Growth Stocks to Buy and Hold Forever

Got $200? 2 Dividend Growth Stocks to Buy and Hold Forever

Looking for dividend stocks to add to your portfolio that won’t break the bank? Even with just $200 to invest, there are plenty of options to consider. But if you are looking to buy and hold for a long time, maybe even forever, you’ll want to be very selective.

If that sounds like you, two stocks that you’ll want to spend some time getting to know are NextEra Energy (NYSE: NEE) and Enterprise Products Partners (NYSE: EPD). Here’s why.

1. NextEra Energy is out of favor, for now

NextEra Energy’s dividend yield is around 3.2%, which is just a touch below the average utility, using the Vanguard Utilities Index ETF as a proxy. But don’t dismiss the stock because of that, NextEra Energy’s yield happens to be near its highest levels of the past decade, suggesting it is on sale today.

Image source: Getty Images.

The next most important number here is the dividend growth rate, which has averaged a heady 10% a year over the past decade. And management expects the dividend to grow at that rate through 2026. If you are looking for a balance between dividend yield and dividend growth, NextEra Energy is the kind of company you’ll want in your portfolio.

The business, meanwhile, is two-in-one. The core of the story is NextEra Energy’s regulated utility operations, which consist largely of Florida Power & Light. This is a slow and steady business that has long benefited from a growing customer base thanks to in-migration to the Sunshine State. The other part of the company is a fast-growing renewable power business driven by long-term purchase contracts. Although it is the smaller of the company’s two businesses, NextEra Energy hopes to as much as double its clean energy capacity by 2026.

2. Enterprise Products Partners offers high-yield and distribution growth

Master limited partnership (MLP) Enterprise Products Partners’ distribution yield is a huge 7%. The distribution has been increased annually for 25 consecutive years. The core of the business here is energy infrastructure, like pipelines, that allow Enterprise to charge usage fees. In other words, demand for oil and natural gas is more important than the price of the commodities flowing through Enterprise’s vast North American energy infrastructure network. This is a reliable business in an inherently unreliable sector.

That said, distribution growth isn’t going to be as fast as you would expect from a company like NextEra. Over the past 25 years Enterprise’s distribution has grown at an annualized 7% rate, but mid- to low-single digits have been the norm more recently. That’s probably all investors should go in expecting in the future, as well. The big yield will likely make up the lion’s share of your return. However, if you are a dividend investor trying to maximize the income your portfolio generates that will probably be just fine.

Of more importance, then, will be the strength of the distribution. On that score, Enterprise holds up very well. It has an investment-grade-rated balance sheet, the distribution was covered 1.7 times over by distributable cash flow in 2023, and leverage is modest relative to similarly sized peers.

One for growth and one for yield

While both are very well-run entities that you can comfortably own for years to come, there’s a clear and stark difference between NextEra Energy and Enterprise Products Partners. While both will reward you with regular increases in the income they throw off, NextEra Energy is more of a dividend growth investment and Enterprise Products Partners is more of a high-yield play. At least one will likely be appealing to you, if not both.

Should you invest $1,000 in Enterprise Products Partners right now?

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Got $200? 2 Dividend Growth Stocks to Buy and Hold Forever was originally published by The Motley Fool