Day: September 4, 2024

Dividend stocks are proven wealth builders. The average dividend stock has delivered above-average annual total returns over the long term, with the highest returns coming from companies that consistently increase their dividends. The average dividend grower has delivered a 10.2% annualized total return over the last five decades compared to 7.7% for the average member of the S&P 500, according to data from Hartford Funds and Ned Davis Research.

That data is driving me to load my portfolio with dividend growth stocks. I try to buy several each month to help build my wealth. Topping my list this September is Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) and Rexford Industrial Realty (NYSE: REXR). Here’s why I plan to buy even more of these top dividend stocks this month.

A powerful income generator

Brookfield Renewable has done a stellar job increasing its dividend over the years. The leading global renewable energy producer has grown its payout at a 6% compound annual rate over the last 20 years. It has delivered at least 5% annual dividend increases for 13 straight years.

The company’s high yield, which currently sits around 5%, and its steadily growing dividend have helped give it the power to produce strong total returns. Over the last decade, Brookfield has generated a 10.8% average annual total return.

Brookfield Renewable should have ample power to continue increasing its dividend in the future. It expects to grow its funds from operations (FFO) by more than 10% annually through 2028. Several factors power that forecast. Brookfield expects organic growth drivers like inflation-linked contractual rate increases, margin enhancement activities, and its massive renewable energy project development pipeline to drive 7% to 12% annual FFO per share growth through 2028. Meanwhile, it anticipates accretive acquisitions pushing its growth rate above 10% annually. This forecast easily supports its plan to grow its dividend by 5% to 9% annually over the long term. Add its high yield to its high growth rate, and Brookfield Renewable could generate average annual total returns in the mid-teens from here.

Focusing on a prime location continues to pay big dividends

Rexford Industrial Realty has been a dividend growth juggernaut. The industrial REIT has increased its payout every year since coming public in 2013. It has delivered a blistering 18% compound annual dividend growth rate over the last five years, nearly double the 10% compound annual growth rate of its peers. That has helped drive a roughly 15% compound annual total return for its shareholders since it came public.

The REIT has grown briskly by focusing on the high-demand, supply constrained Southern California industrial market. Those market fundamentals keep occupancy rates high, which drives robust rent growth. Rexford Industrial Realty further capitalizes on that market by making accretive acquisitions.

Rexford Industrial Realty recently bought a high-quality portfolio of 48 properties from Blackstone in a $1 billion deal. Those properties come with embedded growth upside from future rental increases. That acquisition helped drive a 20.9% increase in the REIT’s net operating income in the second quarter and an 11.1% jump in its core FFO per share.

The company has lots of embedded growth ahead from that baseline. It sees a combination of repositioning and redevelopment projects, embedded annual contractual rental increases, mark-to-market rent growth as legacy leases expire, and recent investments growing its net operating income by 35% over the next three years. Meanwhile, future accretive acquisitions would further enhance its growth rate. With a fortress-like balance sheet, Rexford has ample liquidity to capitalize on accretive acquisition opportunities as they arise. Those visible growth catalysts should enable the REIT to continue increasing its dividend, which currently yields more than 3%.

Wealth-building dividend growth stocks

Brookfield Renewable and Rexford Industrial Realty have done fantastic jobs increasing their dividends over the years. That’s enabled them to grow value for shareholders by delivering strong total returns. They both have lots of visible growth ahead and should have no trouble increasing their payouts and generating strong total returns in the future. That’s why I plan to add to my positions in each one again this month.

Should you invest $1,000 in Brookfield Renewable right now?

Before you buy stock in Brookfield Renewable, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brookfield Renewable wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 3, 2024

Matt DiLallo has positions in Blackstone, Brookfield Renewable, Brookfield Renewable Partners, and Rexford Industrial Realty. The Motley Fool has positions in and recommends Blackstone, Brookfield Renewable, and Rexford Industrial Realty. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

2 Top Dividend Stocks I Plan to Buy Even More of This September was originally published by The Motley Fool

Global demand for liquefied natural gas (LNG) could surge more than 50% by 2040, according to an estimate by Shell. Fueling that rosy outlook is the expectation that China will switch its power plants from coal to gas and that LNG will fuel the economic growth engines of South Asian countries.

Tellurian (NYSEMKT: TELL) had hoped to cash in on the global LNG boom by building its proposed Driftwood LNG facility. That had made it a popular LNG stock. However, with Tellurian agreeing to sell itself to Woodside Energy in a $1.2 billion cash deal, investors will need to look elsewhere to cash in on the LNG boom. Here are two alternatives to consider.

The U.S. LNG leader

Tellurian had hoped to build a leading pure-play LNG export company in the United States. Its proposed Driftwood LNG terminal could eventually export 27.6 million tonnes per annum (MTPA) once fully developed in 2028. The company estimated that the facility could produce over $3 billion in annual cash flow once it reached that point. Meanwhile, Tellurian owns enough land to build a second site capable of producing another 30 MTPA of LNG per year.

In a sense, Tellurian sought to replicate Cheniere Energy (NYSE: LNG). It became the first company to export LNG from the lower 48 states when its Sabine Pass terminal began commercial operations in 2016. Today, Cheniere operates two sites, Sabine Pass and Corpus Christi, with a combined capacity of 45 MTPA. The company has invested over $38 billion to build the country’s largest LNG producer and second biggest globally.

Cheniere Energy is on track to produce $3.1 billion to $3.5 billion of distributable free cash flow this year, something Tellurian wouldn’t have delivered for many years, if ever. The company is using the cash to invest in growing its LNG export capacity, repay debt, and return money to shareholders through repurchases and dividends. It recently authorized an additional $4 billion in share repurchases through 2027 and boosted its dividend payment by another 15%. It’s also building more LNG export trains at Corpus Christi and working on future expansion projects at both sites to continue growing its production capacity and cash flow.

Feeding gas to LNG facilities

LNG export terminals need a steady supply of natural gas. Because of that, they rely on pipeline companies to bring gas into their facilities. Few companies are in a better position to supply more gas to LNG export terminals along the U.S. Gulf Coast than Kinder Morgan (NYSE: KMI). It currently transports a little less than half of all the feed gas into U.S. LNG export terminals.

The company’s extensive pipeline network, particularly in Texas and Louisiana, puts it in a strong position to capture opportunities to supply more gas to LNG export facilities. The company currently has contracts to move 7 billion cubic feet per day (bcfd) of gas to LNG terminals. It sees that growing to 10 bcfd by the end of next year as more capacity comes online. Meanwhile, it’s pursuing 13 bcfd of additional opportunities to supply gas to LNG export facilities.

LNG exports are just one of Kinder Morgan’s many growth drivers. The company is also supplying more gas to support the country’s growing power demand and exports to Mexico. In addition, it’s investing to support the growth of lower carbon energy like renewable natural gas and renewable fuels.

Kinder Morgan currently produces about $5 billion in annual free cash flow. It pays about half that cash in dividends. It uses the rest to invest in high-return expansion projects, repurchase shares, and maintain its financial flexibility to make accretive acquisitions when opportunities arise. The company currently has $5.2 billion of growth capital projects in the backlog that provide visibility into its ability to grow its cash flow through 2028. That number should rise as it captures additional LNG-related expansion opportunities.

Cash in on the LNG boom right now

Tellurian offered investors the dream of potentially cashing in on the global LNG boom one day when it finished building its proposed Driftwood facility. Unfortunately, it couldn’t turn that dream into a reality.

However, while Tellurian couldn’t deliver on its LNG promise, Cheniere Energy and Kinder Morgan are already cashing in on the boom. They’re generating billions of dollars in cash flow from their LNG-related operations, which should continue growing in the future. That’s giving them more money to return to shareholders through repurchases and growing dividends. They’re great alternatives for those seeking to cash in on the growth ahead for LNG demand.

Should you invest $1,000 in Tellurian right now?

Before you buy stock in Tellurian, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Tellurian wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 3, 2024

Matt DiLallo has positions in Kinder Morgan and Woodside Energy Group. The Motley Fool has positions in and recommends Cheniere Energy and Kinder Morgan. The Motley Fool has a disclosure policy.

With Tellurian on the Verge of Disappearing, Here are 2 Alternative Ways to Cash in on the LNG Boom was originally published by The Motley Fool

Dollar General (NYSE: DG) shares lost nearly a third of their value after the discount retailer issued weak guidance with its fiscal Q2 results on Aug. 29. The plunge sent the stock to its lowest levels in more than five years.

Let’s examine the company’s earnings report and guidance and see if this is an opportunity to buy the shares on the dip, or if investors should stay away.

Lower-income consumers are under pressure

For its fiscal second quarter (ended Aug. 2), Dollar General saw its results fall short of expectations. Revenue rose 4% year over year to $10.2 billion, but its earnings per share (EPS) sank 20% to $1.70. That was below the analyst consensus of $10.4 billion in revenue and adjusted EPS of $1.79.

Same-store sales edged up 0.5% but were below the company’s expectations. The gains were driven by a 1% increase in traffic, although the average checkout ticket declined by 0.5%. Growth came entirely from the consumable category, as the seasonal home and apparel categories saw declines. Consumables are items that shoppers use up (and buy again) on a regular basis.

Gross margin decreased 112 basis points to 30%. The company said that shrink continued to remain a “significant” headwind, although it is making some progress reducing it. Shrink is the amount of merchandise that gets lost, damaged, spoiled, stolen, or just generally can’t be sold.

When looking at a struggling retailer, it is always good to look at inventory levels, as high inventories can lead to more markdowns and even more pressure down the line. On that front, the company’s merchandise inventory fell 7% to $7 billion and was down 11% on a per-store basis. Nonconsumable inventory decreased 13% and was 17% lower on a per-store basis.

Looking ahead, Dollar General lowered its full-year guidance. It now expects revenue to grow between 4.7% and 5.3%, with same-store sales increasing between 1% and 1.6%. That’s down from a prior outlook of revenue growth of 6% to 6.7% on comparable-store growth of 2% to 2.7%

Meanwhile, it lowered its full-year EPS forecast to a range of $5.50 to $6.20, down from previous guidance of between $6.80 and $7.55. It said that its gross margin will feel some pressure due to increased promotional markdown activity.

The company said that its core base of lower-income shoppers was feeling worse off than they were just six months ago, as higher prices, interest rates, and unemployment weigh on the group. About 60% of Dollar General’s customers have a household income of less than $35,000 a year. It noted that in surveys, many of its customers say they have had to turn to credit card debt, with about 30% maxing out one card.

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Should investors buy the dip or stay away?

Dollar General’s core customers have been under a lot of pressure in recent years due to inflation, and even with inflation starting to moderate, these past inflationary pressures are catching up to lower-income households that have taken on credit card debt to just get by. High inflation is pressuring lower-income families much more than the middle class. This can be seen in the comparatively much stronger Q2 results posted by Walmart and Target.

At the same time, the retailer needs its same-store sales to grow over 3% in order for it to leverage its expenses and grow its earnings. Its latest guidance reduction is now well below that 3% mark. That means that its earnings are likely to be pressured until it manages to reaccelerate same-store sales growth. Importantly, though, its inventory does look to be in pretty good shape.

From a valuation perspective, the company now trades at a forward price-to-earnings (P/E) ratio of only about 12 based on analyst estimates for fiscal year 2025 (ending January 2026). That’s inexpensive and well below the valuation it has traded at over the past few years.

Dollar General has been thrown in the bargain bin after its earnings report, and the retailer should eventually be able to climb out. However, that is not going to happen overnight as it will need to see both a better economy and more normal inflation. About 80% of its business is consumables, so its same-store sales benefit over time from moderately rising consumable prices.

I’d recommend taking a starter position and then looking to buy more on any additional weakness in the stock to take advantage of long-term strength.

Should you invest $1,000 in Dollar General right now?

Before you buy stock in Dollar General, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dollar General wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $731,449!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 3, 2024

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target and Walmart. The Motley Fool has a disclosure policy.

Dollar General Stock Crashes. Should Investors Buy the Dip or Stay Away? was originally published by The Motley Fool

Once known for its urban decay and financial turmoil, Detroit is emerging as an unlikely haven for real estate investors, offering opportunities that seem almost too good to be true in some cases.

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Chase Hunter, a Houston native turned Detroit real estate investor, symbolizes the new wave of opportunity seekers. “I closed on my first two properties the same day in June of 2021,” Hunter recounted to Realtor.com. “The day I closed was my very first time in Detroit.”

Her initial purchases were a $2,000 property and another for $1,800.

Trending:

Hunter went from searching for cheap properties online to becoming a Detroit-based real estate agent and investor. And it points to the city’s dramatic turnaround. In 2013, Detroit filed the largest municipal bankruptcy in U.S. history, burdened by $20 billion in debt.

Today, it’s being called “America’s most unlikely real estate boomtown.”

The numbers tell the story. Detroit’s median home sale price has skyrocketed from a low of $58,900 in 2009 to $250,000 in May 2024, according to data from Realtor. That’s a 324% increase over 15 years.

“Buyers, including investors, took advantage of low home prices in the area over the last decade, bringing energy and funds into the city,” said Hannah Jones, a senior economic research analyst at Realtor.

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However, it’s not so straightforward. Many properties come with baggage, including back taxes and the need for renovation. Hunter’s experience reflects just that. Her $2,000 property required an additional $85,000 in renovations before it was ready for renters.

The city’s reputation for crime is also a concern for potential investors. “Crime is definitely still a major challenge,” Hunter said to Realtor. “It can deter you from buying here for sure.” However, she said that the situation is improving, with Detroit reporting its lowest crime rate in 57 years last year.

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Despite the near-term challenges, major players are betting big on Detroit’s resurgence. Dan Gilbert, the billionaire co-founder of Rocket Mortgage, is a driving force behind the city’s revitalization, according to the Wall Street Journal.

His real estate venture, Bedrock Detroit, has acquired over 130 properties downtown, pouring billions into development projects.

Other corporate giants are following suit. According to the WSJ, Ford is investing more than $900 million to redevelop the iconic Michigan Central Station and its surroundings. General Motors recently announced plans to relocate its headquarters to a new development in the downtown area.

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The influx of investment is reshaping Detroit’s skyline and streetscape. Luxury retailers like Gucci have opened stores downtown, the WSJ noted, while the number of apartments in the central business district has more than doubled since 2010.

For investors like Hunter, Detroit’s appeal is in its combination of low entry costs and high potential returns. “Investors come to Detroit from all corners of the country because the market is like no other,” she says.

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This article Investors Cashing In On Detroit’s Real Estate Surge: ‘A Market Like No Other’ originally appeared on Benzinga.com

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