Day: October 7, 2024

Utility stocks have surged this year. As measured by the Utilities Select Sector SPDR ETF, the average utility has gained nearly 30%. Add in dividends, and the total return is well over 30%.

As utility stock prices have risen, their dividend yields have declined. However, there are still some very attractive options out there if you know where to look. Black Hills (NYSE: BKH), Brookfield Infrastructure (NYSE: BIPC)(NYSE: BIP), and Brookfield Renewable (NYSE: BEPC)(NYSE: BEP) stand out to a few Fool.com contributors right now as three of the best higher-yielding options in the utility space. That makes them great options for those seeking to generate some dividend income.

The mighty little dividend utility

Reuben Gregg Brewer (Black Hills): The average utility, using Utilities Select Sector SPDR ETF as an industry proxy, has a dividend yield of about 2.9%. Black Hills is offering 4.25%. If you are looking for a high yield, you’ve found it right here. But that’s not the only thing to like about Black Hills’ dividend. The regulated natural gas and electric utility has also increased the dividend for 54 consecutive years. You don’t build a track record like that by accident, which is why there are so few Dividend Kings like Black Hills in the utility sector.

Don’t feel bad if you’ve never heard of Black Hills. It is a relatively small company. With a market capitalization of roughly $4 billion, it isn’t half the size of the smallest utility in the S&P 500 Index. But this is a net benefit for small investors who do know about Black Hills (which now includes you). While everyone else is focusing on industry giants, you can spend your time getting to know a high-yield utility that’s a “giant” when it comes to dividend consistency.

Backing the dividend at Black Hills is a customer base that’s growing roughly three times faster than the U.S. population. And while earnings growth is targeted to fall between just 4% and 6% a year, with the dividend likely to track that number, that’s more than enough to not only keep up with inflation but also grow the buying power of the dividend over time.

Sure, you’ll have to dig a little deeper if you want to track Black Hills. But the extra yield and dividend consistency will likely be well worth the effort.

A historically cheap valuation

Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure has underperformed compared to other utility stocks this year. The corporate shares (BIPC) have rallied 17%, while the limited partnership units (BIP) have gained only 8%. Because of that (and the company’s strong growth), it trades at a very compelling valuation these days, especially compared to other utilities.

The company trades at 14.1 times its adjusted funds from operations (FFO). That’s below its historical average of 15.5 and its average over the past five years of 16.5. That low valuation is why Brookfield Infrastructure currently offers such an attractive yield (4.8% for BIP and 3.9% for BIPC), more appealing than the average utility, which yields around 3% these days.

Brookfield also offers better dividend growth potential (5%-9% annually compared to around 4% for other utilities). Meanwhile, it provides a greater degree of diversification (it operates utilities and other utility-like businesses in the transportation, energy, and data infrastructure sectors) with lower risk, given its low exposure to consumers.

The company also has strong overall growth potential. It expects to grow its FFO at a 10%-plus annual rate in the future. Its significant exposure to the digitalization megatrend (more than 60% of its FFO) is a big factor powering that view.

Brookfield’s utilities and gas infrastructure assets should benefit from surging power demand. Meanwhile, its utility-like data infrastructure platforms (semiconductor manufacturing, data centers, towers, and fiber) will benefit from the expected growth in computing power and data demand from megatrends like artificial intelligence (AI).

This is one of the more compelling investment opportunities in the utility space these days. The company offers high growth potential and a high-yielding dividend at a historically low valuation. Because of that, it could produce powerful total returns in the coming years, making it a great stock to buy right now.

Renewable-powered growth

Neha Chamaria (Brookfield Renewable): Climate change adds to energy security risk, one of the biggest reasons why nations across the globe are adopting clean energy. Renewable energy sources, like wind, solar, and water, are readily available and aplenty with little or no greenhouse gas emissions.

Therefore, companies generating electricity from renewable energy sources have strong growth potential. One such company is Brookfield Infrastructure’s renewables-focused sibling, Brookfield Renewable. The company yields 5.3% for units of the partnership and 4.5% for its corporate shares.

Brookfield Renewable has a massive portfolio of hydro, wind, and solar assets and huge utility-scale solar and wind development platforms with a presence in more than 20 countries. As is typical for most utilities, Brookfield sold a major chunk, nearly 90%, of the renewable power it generated under long-term, fixed-price contracts with an average contractual life of 13 years last year.

The company acquires renewable assets, operates them commercially with a focus on cash flow and dividend growth, and periodically divests some assets to fund growth. It plans to invest $8 billion to $9 billion over the next five years into growth opportunities, aiming to grow its annual FFO by more than 10%. Importantly, Brookfield is also targeting annual dividend growth of 5% to 9% during the period.

With Brookfield Renewable on track to deliver a record year but the stock barely gaining 2% so far this year, it looks like one of few dividend stocks you could even double up on now. Since its cash flows back dividends, investors can expect bigger dividends year after year, which should further boost their total returns from the stock over time.

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

Before you buy stock in Brookfield Renewable Partners, 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 Partners 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 $765,523!*

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*Stock Advisor returns as of September 30, 2024

Matt DiLallo has positions in Brookfield Infrastructure Corporation, Brookfield Infrastructure Partners, Brookfield Renewable, and Brookfield Renewable Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer has positions in Black Hills. The Motley Fool has positions in and recommends Brookfield Renewable. The Motley Fool recommends Brookfield Infrastructure Partners and Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

After a Nearly 30% Sector Rally, Are There Any High-Yield Utility Stocks Left? (YES, and Here Are 3 of the Best!) was originally published by The Motley Fool

For a majority of the last two years, no trend has excited the investing community quite like the rise of artificial intelligence (AI). But in 2024, the euphoria surrounding stock splits has, arguably, played an equally critical role in lifting stock valuations.

A stock split is a mechanism publicly traded companies have available that allows them to adjust their share price and outstanding share count by the same factor. What’s worth noting about stock splits is that they’re entirely cosmetic. Adjusting a company’s share price and share count has no impact on market cap or operating performance.

Though there are two types of stock splits — forward and reverse — investors overwhelmingly favor companies conducting forward splits. This is the type of split designed to reduce a company’s share price to make it more nominally affordable for everyday investors, and it’s almost always undertaken by businesses that are handily out-innovating and out-executing their peers.

In 2024, more than a dozen prominent companies have announced or completed stock splits, and all but one have been of the forward-split variety.

This week, one of the cheapest tech stock-split stocks of 2024 will have its moment in the sun as it readies for its first split in nearly a quarter of a century.

AI stock-split stocks have hogged the spotlight for much of the year

With high-flying stocks often drawing the attention of Wall Street and investors, it should come as little surprise that much of the focus this year has been on artificial intelligence-driven companies completing stock splits. Although Super Micro Computer and Lam Research effected respective 10-for-1 forward splits of their own last week, I’m primarily talking about the buzz AI leaders Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO) have created.

Nvidia was the first top-tier AI stock to complete a forward split in 2024, with the company’s historic 10-for-1 split taking effect after the close of trading on June 7.

The need for Nvidia to split — its shares topped $1,200 the day its split went into effect — is a direct reflection of its dominance in high-compute enterprise data centers. Demand is off the charts for the company’s H100 graphics processing unit (GPU) and next-generation Blackwell GPU platform, which have sent sales, profits, and gross margin soaring. Nvidia’s exceptional pricing power has allowed it to charge between a 100% and 300% premium to competing AI-GPUs.

Meanwhile, Broadcom followed in Nvidia’s footsteps five weeks later by completing its first-ever stock split, also 10-for-1, following the close of trading on July 12.

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Even though Broadcom has a considerably more diverse revenue stream than Nvidia, it’s Broadcom’s AI networking solutions that have driven investor interest in the company. Broadcom’s networking solutions are responsible for connecting GPUs in AI-accelerated data centers in order to reduce tail latency and maximize their computing potential.

But while Nvidia and Broadcom have been the talk of Wall Street, and are, without question, the highest-profile stock-split stocks of 2024, they’re no longer the fundamental bargains they once were. The tech goliath set to complete its stock split later this week certainly fits the definition of cheap.

Wall Street’s newest tech stock-split stock is a bargain

In mid-May, consumer electronics juggernaut Sony Group (NYSE: SONY) unveiled plans to conduct a 5-for-1 forward split — its first split since May 2000. Though the effective date for this split was Oct. 1 in its home market of Japan, it’s Oct. 8 for the company’s American depositary receipts (ADRs) listed in the U.S. Long story short, when Sony Group opens for trading on Oct. 9, its New York Stock Exchange-listed shares should be closer to $19.

Most consumers are probably familiar with Sony because of its gaming division. The PlayStation 5 is the top-selling ninth-generation video game console and made its debut in late 2020. Even though it’s been almost four years since it hit retail shelves, Sony recently increased the price of PlayStation 5 by a double-digit percentage in Japan as a way to boost sales.

With new gaming consoles typically coming out every six or seven years, excitement is starting to build for Sony’s next successor. Though we’re still, presumably, at least two years away from the company recognizing sales from its next-gen gaming system, it’s not uncommon for investors to somewhat front-run an expected boost in sales and profits.

Additionally, Sony is enjoying meaningful sales growth from PlayStation Plus. This is the subscription service that allows users to game with their friends, access exclusive games, and store their data in the cloud.

But the sum of Sony’s parts includes more than just gaming. It’s also a major player in music, movies, and Imaging and Sensing Solutions (ISS). The latter is particularly important, with Sony being one of the key suppliers of image sensors used in next-generation smartphones. ISS sales surged 21% in the company’s fiscal first quarter (ended June 30), with operating income from this segment nearly tripling.

Japan’s largest businesses are also known for their capital-return programs — and Sony is no exception. On the same day its 5-for-1 split was announced, Sony’s board authorized the repurchase of up to 30 million shares, representing 2.46% of the company’s outstanding count. Buybacks have the ability to increase earnings per share (EPS) for companies with steady or growing net income. Over time, share repurchases can make Sony’s stock even more attractive to fundamentally focused investors.

Last but not least, Sony Group’s stock is reasonably cheap in a generally pricey tech sector. Its forward price-to-earnings (P/E) ratio of 15 is considerably lower than Nvidia (forward P/E of 30) and Broadcom (forward P/E of 28), as well as the benchmark S&P 500 (forward P/E of 24). With a new console looming and high-margin PlayStation Plus revenue rising, Sony Group has the traits of a cheap stock-split stock that can be bought with confidence by opportunistic long-term investors.

Should you invest $1,000 in Sony Group right now?

Before you buy stock in Sony Group, 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 Sony Group 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 $765,523!*

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 30, 2024

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lam Research and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

One of Wall Street’s Cheapest Tech Stock-Split Stocks Is Ready to Take Center Stage This Week was originally published by The Motley Fool

Grant Cardone isn’t one to shy away from making bold statements, especially when it comes to money. He feels $10 million is the new $1 million.

In a TikTok video titled “If You’re A Millionaire You’re Broke – Get To $10 Million To Be Considered Rich,” Cardone breaks down his belief that having a million dollars in 2024 is barely enough to keep you afloat, much less make you rich.

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“If you have a million dollars and you want to buy a house, well then you’re down to $200k,” Cardone explains, highlighting just how quickly money can disappear when faced with life’s big expenses. He takes it a step further, saying, “Your mom has cancer, you’re out of $200k in 45 days. You’re back to zero again.” His point? A million dollars isn’t what it used to be.

See Also: I’m 62 Years Old And Have $1.2 Million Saved. Is This Enough to Retire Stress-Free?

Cardone even dives into some historical context, noting, “A million was a lot of money in 1960. If money deflated at the rate that it has in my 65 years, money is worth 10% of what it was then. So, if a millionaire was rich in 1960, you need $10 million in 2024 to be considered rich.” According to him, if you’re still using the idea of $1 million as a benchmark for wealth, you’re behind the times.

His math is correct. According to inflation calculators, $1 million in 1960 is actually equivalent to $10,635,000.00 in 2024.

Trending: Founder of Personal Capital and ex-CEO of PayPal re-engineers traditional banking with this new high-yield account — start saving better today.

Is $1 Million Still Enough?

In his book The Wealth Creation Formula, Grant Cardone states, “A million dollars isn’t enough” and “$10 million is the new $1 million.”

In a GoBankingRates interview, Cardone explains what life is like for someone who retires with $1 million. He says that if you stretch that money over 35 years of retirement, it equals about $28,571 per year or roughly $2,381 a month.

As Cardone told GoBankingRates, “The average rent in America is $2,000. You have $500 a month left over. You haven’t eaten, you haven’t gone out, you haven’t bought one pair of shoes, you don’t have health care, you don’t have insurance and you definitely don’t have a car payment. You have one car payment, you’re negative $200 a month. So you’re the millionaire that can’t afford anything.”

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Trending: How do billionaires pay less in income tax than you? Tax deferring is their number one strategy.

Building Wealth Beyond $1 Million

So, what is Cardone’s solution to this problem? Building passive income. In his eyes, the key to long-lasting wealth is finding ways to make money while you sleep. Whether investing in real estate or creating other income streams, he focuses on ensuring your money works for you – not the other way around.

He emphasizes creating enough passive income to match or exceed your earned income, ideally between $400,000 and $500,000 annually. That’s a tall order for most people, but it’s the kind of financial security Cardone says you need to live comfortably today.

Trending: Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” Here’s how you can earn passive income with just $100.

Criticism and Realities

Of course, not everyone agrees with Cardone. Plenty of people think $1 million is still a solid goal, with some surveys suggesting a net worth of around $2.2 million is enough to feel wealthy. However, Cardone’s point is that aiming for $1 million might leave you struggling to keep up in the long run.

Whether you agree with his $10 million target or not, financial security looks a lot different now than it did in 1960.

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This article Grant Cardone Says ‘You Need $10 Million To Be Considered Rich’ – $1 Million in Retirement Won’t Cut It If You Want To Afford Anything originally appeared on Benzinga.com

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