3 Top Dividend Stocks to Buy in July

If you have some cash to put to work in July, it is a great time to be looking at dividend stocks. But with the S&P 500 near all-time highs and yielding just 1.3%, you need to be picky.

Picky investors will like high yielders NextEra Energy (NEE 1.18%), Chevron (CVX -0.71%), and Enterprise Products Partners (EPD -0.54%). Here’s why this trio of dividend stocks, with yields up to 6.9%, are worth your attention in July.

1. NextEra Energy is a dividend growth stock

NextEra Energy’s dividend yield is the lowest on this list, at “just” 3.2%. That, however, is well above the market’s yield and higher than the utility sector’s roughly 2.8% average yield. Notably, NextEra’s dividend performance is backed by 31 consecutive annual dividend increases.

NextEra Energy is really two businesses in one. The company’s foundation is its regulated utility operations in Florida. This is a slow and steadily growing business. On top of that, management has layered one of the world’s largest producers of solar and wind power. Investors are worried about the clean energy business right now because of changing political trends, but the world continues to shift away from dirtier energy sources. There is likely to be a long runway for growth ahead for NextEra.

The fast-growing clean energy business has supported the company’s rapid dividend growth, at a 10% annualized clip over the past decade. It should continue to support rapid dividend growth well into the future, too. If you are a dividend growth investor, NextEra is likely to be an attractive buy in July.

2. Chevron is built to survive in a volatile sector

Next up is Chevron, which has a lofty 4.7% yield. The average yield in the energy sector is around 3.5% right now. Chevron has increased its dividend annually for 38 consecutive years, which is pretty incredible given the volatility in the energy sector over that span.

Chevron is built from the ground up to handle the swings in oil prices. For starters, it has one of the strongest balance sheets of its closest peer group. On top of that foundation, it has built a geographically diversified business that has exposure to the entire energy value chain. This diversification helps to soften the impact of swings in oil prices, with the strong balance sheet allowing management to take on debt so it can muddle through downturns.

The model has worked very well for a long time. With oil prices again in a volatile state, July could be a good time to buy high-yielding Chevron.

3. Enterprise is a high-yield tortoise

Enterprise also hails from the energy sector, but it only operates in the midstream segment. That means it owns the energy infrastructure, like pipelines, that help to move oil and natural gas around the world. The master limited partnership (MLP) has a distribution yield of 6.9%. The distribution has been increased annually for 26 years and counting.

The key piece of the puzzle here is that Enterprise is a toll taker. It largely charges fees for the use of its energy infrastructure assets. That means that the volume of energy flowing through its system is more important than the price of that energy. Given how important energy is to modern life, volumes tend to remain resilient even when energy prices are low. And, thus, Enterprise has very reliable cash flows to back its lofty yield.

That said, there is one caveat here. Enterprise’s high yield will likely make up the lion’s share of an investor’s return over time. But if you are looking to maximize the income your portfolio generates, that probably won’t be a bother to you.

Good options in July if you take the time to look

The “market” isn’t a single thing; it is a collection of smaller things. Even with the market near all-time highs and offering a fairly disappointing dividend yield, you can still find attractive dividend stocks. You just have to look past the forest to see the trees that make it. And if you do that in July, you’ll find dividend gems like NextEra Energy, Chevron, and Enterprise.