2024 might be drawing to a close, but it’s not too late to spot some standout companies you might want to invest in before the year wraps up. While some investors are eager to find high-growth stocks with plenty of potential, others are looking for dependable companies that provide steady dividend income, regardless of market fluctuations.
Dividend stocks present a unique opportunity: they let you participate in the market without depending solely on stock price increases. By reinvesting this dividend income back into the market, you can build your wealth over the long haul.
Consider Honeywell International, Enterprise Product Partners L.P., and Southern Company. These stocks have rewarding histories, with their values appreciating by 8%, 16%, and 17% respectively this year alone. Let’s delve into why these three are excellent picks as we head into December.
### A Breakup Could Unlock Huge Value in Honeywell
Lee Samaha is keeping a close eye on Honeywell, a major industrial conglomerate planning to partake in the wave of corporate breakups trending over the last five years. Several of its peers, like United Technologies and General Electric, have transformed by splitting into smaller, more focused entities. Recently, Honeywell has hinted that it might follow suit.
The company’s board is actively evaluating its business portfolio and considering spinning off its Aerospace division. This move aligns with suggestions from an activist investor and makes sense in today’s high-value aerospace market, which is Honeywell’s largest segment.
Furthermore, Honeywell is already gearing up to divest its advanced materials business by 2025 or 2026 and has agreed to sell its personal protective equipment segment for $1.325 billion in cash. Their other divisions, such as industrial automation and building automation, alongside its substantial share in the quantum computing firm Quantinuum, position Honeywell in promising market sectors.
Comparing it to others, like Emerson Electric and Johnson Controls which have restructured their portfolios toward automation, the strategy seems prudent. It also means shareholders are poised to see significant benefits, all while enjoying a dividend yield of 1.9%, which overtakes the average yield of the S&P 500.
### Enterprise Products Partners is a Reliable Cash Generator for Investors
According to Scott Levine, even though shares of Enterprise Products Partners have climbed more than 16% since January, they still offer great value. Known as a “fully integrated midstream energy company,” Enterprise manages over 50,000 miles of pipelines and numerous other vital assets, cementing its leading position in the market.
The company’s 6.7% forward dividend yield is particularly appealing for those seeking to strengthen their passive income streams. Despite concerns about sustaining such a high yield, Enterprise’s long-term customer contracts provide a crystal-clear view of impending cash flows and expected expenditures, ensuring stability. Impressively, over 90% of these contracts account for inflation adjustments too.
For over two decades, Enterprise Products Partners has methodically increased its payouts, showcasing its commitment to investors while maintaining financial health. Holding a decent distribution coverage ratio and receiving investment-grade ratings from major credit agencies only underscore this reliability. With stock priced at around 10.8 times forward earnings, now seems like an ideal time to consider adding Enterprise Products Partners to your portfolio.
### Southern Company’s Dip Offers a Strategic Advantage
Finally, Daniel Foelber highlights Southern Company, which has had a robust year despite a recent 6% dip in line with a sector-wide utilities sell-off. This decline has actually raised Southern’s dividend yield to 3.5%, presenting an attractive prospect for those seeking steady income.
Southern operates across multiple energy sectors, including electricity, natural gas, and even nuclear power, with a presence in both traditional and renewable energy sources. Notably, it operates eight nuclear plants, including the newly operational Vogtle Units 3 and 4, a significant milestone as these are the first U.S. nuclear units in 30 years.
The company’s diverse energy portfolio provides reliable cash flows, enabling consistent dividend growth over the years. While not growing rapidly, Southern has consistently increased dividends annually over the past two decades.
Working closely with government agencies to establish customer pricing, Southern offers predictable earnings in various economic climates, making it a sound choice for conservative investors seeking to build passive income. Its broad investment in different energy sources appeals to those who value a balanced energy mix. With a forward P/E ratio of 20.4, Southern Company is a solid and affordable consideration as we close out the year.
