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3 Top Dividend Stocks to Buy in May

Tyler Crowe, Reuben Gregg Brewer, and Travis Hoium, The Motley Fool

Sell in May and go away? No thanks. For any long-term investor out there, great buys can be found at any time of the year. Of course, one thing that can make a profound impact on your portfolio is buying and holding dividend stocks for decades and letting the power of reinvested dividends do the heavy lifting of wealth building for you. 

So, we asked three of our investing contributors to each highlight a stock they see as a great dividend investment now. Here's why they picked NextEra Energy Partners (NYSE: NEP), W.P. Carey (NYSE: WPC), and Anheuser-Busch InBev (NYSE: BUD)

A roll of $100 bills next to a small sign that says dividends.

Image source: Getty Images.

Renewable energy's dividend king

Travis Hoium (NextEra Energy Partners): A number of yieldcos have risen and fallen over the last three years as their parent companies ran into financial trouble, the pipeline of growth projects dried up, or dividend yields got too high to use share issuances as a means to fund growth. One yieldco left standing, and arguably stronger than ever, is NextEra Energy Partners, the offshoot of utility giant NextEra Energy. The yieldco owns a portfolio of 3,700 megawatts (MW) of renewable energy assets and 542 miles of pipelines in Texas. 

The renewable energy fleet is arguably the best in the yieldco industry, with an average of 18 years left on contracts to sell electricity, primarily to highly rated-utility customers. The length of contracts gives the company stability in cash flow and a higher value for assets than if shorter contracts were attached. 

From a growth perspective, NextEra Energy Partners says it has visibility to grow its dividend 12%-15% through 2023, primarily by buying some of the 28,000 MW of wind and solar pipeline held by NextEra Energy. Through 2020, management expects to be able to use mostly cash on the balance sheet or from operations to acquire growth projects. Beyond that, a relatively low dividend yield of 3.9% will allow the company to issue stock and new debt to fund project acquisitions that are accretive to the dividend long term. 

NextEra Energy Partners isn't the highest yielding dividend stock on the market, but it expects to grow its dividend for at least the next five years at 12% to 15%. By that time, the stock could yield over 8% for investors buying today. Combine the dividend growth with nearly two decades of predictable cash flow, and this is a dividend stock worth buying and holding for decades. 

A diversified high yield and a potential dividend catalyst 

Reuben Gregg Brewer (W.P. Carey Inc.): W.P. Carey is a real estate investment trust, or REIT, that focuses on triple net lease properties. This means that the lessees of its 846 portfolio properties are responsible for most of the operating costs of the buildings. It's a fairly low-risk approach to property investing and has backstopped the REIT's 21 years' worth of annual dividend increases. 

Carey, however, takes a more diversified approach to the triple net lease space than many of its peers, which tend to focus on retail properties. Carey's portfolio is spread across the industrial (30% of its base rents), office (25%), retail (17%), warehouse (14%), and self-storage (5%) sectors. "Other" accounts for the rest. It also gets about roughly a third of its rents from Europe, providing geographic diversification. Most U.S. REITs don't invest across the pond.   

WPC Dividend Yield (TTM) Chart

WPC Dividend Yield (TTM) data by YCharts.

What's most interesting about Carey today, however, is the REIT's 6.6% yield. This is toward the high end of its recent historical range, largely because the REIT sector has been out of favor. There's nothing performance-wise at Carey that suggests its fundamental business has deteriorated. Not only can you catch that high yield, but there's also a potential dividend catalyst here.

WPC Dividend Per Share (Quarterly) Chart

WPC Dividend Per Share (Quarterly) data by YCharts.

Carey manages a non-public REIT called CPA:17, which is nearing the end of its scheduled life. There's a good chance that Carey will buy this non-traded REIT, which would likely lead to a notable dividend increase. That's basically what happened in 2014 when it bought CPA:16. Now could be a really good time to buy this out-of-favor high yielder.   

Don't underestimate Bud's global presence

Tyler Crowe (Anheuser Busch InBev): Let me give you a little anecdotal story in hopes of making a larger point. I currently live in Malawi, a land-locked country in Sub-Saharan Africa. It's not exactly the easiest endeavor to penetrate this market, and yet over the past few months, one thing has made it onto the shelves in grocery stores: Budweiser.

While Americans are intimately familiar with the brand -- and AB InBev's most recent earnings report suggests that the brand is losing its cachet in the States -- there are numerous markets across the world where AB InBev's three signature brands -- Budweiser, Stella Artois, and Corona -- are just getting started. These markets are the ones investors should be focused on. In the prior quarter, all three of these brands saw significant growth outside their home markets, which led to a 7.9% increase in revenue for these products

Despite the global opportunity -- not to mention the company's 60-country product launch associated with the 2018 World Cup -- Wall Street has not been kind to the stock; it is down 23% over the past year. While there are some concerns about its debt load associated with the acquisition of SABMiller, management has already repaid $11 billion of its debt and is targeting a debt-to-EBITDA ratio of two times. 

There is an awful lot to like about the future of AB InBev, and with shares trading at a dividend yield of 4.3%, it looks like an attractive time to buy this stock.

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Reuben Gregg Brewer owns shares of W. P. Carey. Travis Hoium owns shares of NextEra Energy Partners. Tyler Crowe owns shares of Anheuser-Busch InBev NV. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV. The Motley Fool has a disclosure policy.