Sometimes combining two good concepts works very well. For example, Dave & Busters (NASDAQ:PLAY) has made a great deal of money by combining fun video games and tasty food. To help investors find the best dividend stocks to buy in September, I’m going to similarly attempt to combine two of my favorite investing ideas: dividend stocks and energy.
As I’ve written in previous columns, dividend stocks are great because they pay investors while they wait for the stock market to turn itself around.
Energy stocks, in general, and electricity stocks, in particular, are attractive now because Europe is working hard to replace Russian natural gas, while many countries are looking for ways to obtain more electricity in order to power their electric vehicles. Additionally, many companies are moving away from oil and coal and toward electrification of all types of transportation and of heating and cooling.
Therefore, I believe that the best dividend stocks to buy in September are energy names with sizeable payouts.
| DVN | Devon Energy | $68.36 |
| NEE | NextEra Energy | $90.24 |
| BEP | Brookfield Renewable Partners | $37.28 |
Devon Energy (DVN)
No matter what the final outcome of the Russia-Ukraine war is, the EU, in all probability, is going to continue looking for new sources of natural gas. Meanwhile, European liquid natural gas prices are likely to remain elevated for years to come as the EU continues to do its best to avoid buying Russian gas. Devon Energy (NYSE:DVN) can make a great deal of money by exporting its natural gas.
The company recently announced a liquefied natural gas export partnership with Delfin Midstream that should be extremely bullish for DVN stock. Under the deal, Devon, a leading producer of natural gas in the U.S., will export its natural gas using “Delfin’s first Floating LNG vessel” and future LNG ships that Delfin rolls out. Additionally, Devon can make similar deals with other firms in the near term.
DVN stock sports an incredibly low forward price-to-earnings ratio of 6.8. Even if oil prices decline 30% in the next year, shares will remain cheap. Plus, the stock has a forward annual dividend yield of 8.8%.
NextEra Energy (NEE)
NextEra Energy (NYSE:NEE) owns large electric utilities in Florida and sells electricity generated by renewable energy to other utilities.
Calling NextEra “the clear U.S. leader in renewables development,” a Morgan Stanley analyst said the company would be a top beneficiary of the recently passed Inflation Reduction Act. The firm upgraded NEE stock to “overweight” from “equal weight” and hiked its price target on the shares to $99 from $94.
Given NEE’s plan to convert nearly all of its natural gas plants to green hydrogen by 2045, the company is going to benefit tremendously from the generous tax credits for the fuel within the new law. The decade-long extension of tax credits for solar and wind energy should also boost NextEra’s bottom line.
The continued increase in Florida’s population may also serve as a long-term catalyst for the company. Its subsidiary, Florida Power & Light Company, is the largest power utility in the state. Finally, NextEra should benefit from increased demand for electricity due to the electrification of transportation and of heating and cooling.
Given the company’s potential, its forward P/E of 28.2 is reasonable, and it offers an attractive 1.9% yield.
Brookfield Renewable Partners (BEP)
Calling itself “one of the world’s largest publicly traded, pure-play renewable power platforms,” Brookfield Renewable Partners (NYSE:BEP) has a portfolio of “hydroelectric, wind, solar and storage facilities in North America, South America, Europe and Asia.” At the end of the first quarter, the company boasted renewable assets under management of $68 billion.
For the second quarter, the company’s revenue soared 25% year over year to nearly $1.3 billion. Funds from operation per unit of $0.46 was up 10% from a year ago.
Undoubtedly, Brookfield’s bottom line, like that of NextEra, will get a big boost from Congress’ extension of the solar and wind energy tax credits.
BEP stock is up 7% year to date. According to The Wall Street Journal, the stock has a consensus rating of “overweight” and an average price target of $42.32, which is 13.5% above the current share price. And, of course, the dividend stock has an attractive forward yield of 3.3%.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.