Dividends offer investors an incredible strategy to building long-term wealth, especially when those dividends are reinvested. Not only do the following stocks all offer a dividend yield exceeding 5%, they all have their own reasons to be held forever. Let's dig in.
Heating up
Global renewable energy is on fire right now, in a good way. Global annual renewable capacity additions jumped by nearly 50% in 2023, which was the fastest growth rate over the past two decades. It was also the 22nd consecutive year that renewable capacity additions set a new record -- this is a trend investors can get behind.
Those statistics leave a company like Clearway Energy(NYSE: CWEN) poised to benefit in the years ahead as renewable energy continues to boom. Clearway Energy is one of the largest owners of clean energy generation assets in the U.S. market and its fleet comprises roughly 9,000 MW of net owned generating capacity across 26 states. Those assets include wind, solar, energy storage assets, and environmentally sound natural gas generation facilities.
Not only does the Federal Reserve rate cut enable Clearway to more affordably fund acquisitions, the company has multiple investments in renewable energy projects lined up. The company also offers incredible transparency around its dividend, which boasts a yield of 5.5% currently, with a 5% to 8% target growth rate through 2026 and a payout ratio between 80% to 85%.
As renewable energy continues to boom, Clearway is a stock you can hold forever while reinvesting its robust dividend.
Acquisition and 5G
Verizon Communications(NYSE: VZ) is the largest American telecommunications business by revenue, and the company makes its living primarily off internet and phone subscriptions, as well as equipment sales. But a recent move brings a little more into the fold.
Early in September, Verizon announced it had entered into an agreement to acquire Frontier in an all-cash transaction valued at $20 billion. It's a strategic move that will bring in one of the largest pure-play fiber internet providers and will expand Verizon's fiber footprint significantly. The acquisition will also increase scale with 2.2 million fiber subscribers, and management believes it can generate at least $500 million in annual run-rate cost synergies.
The reason investors can hold Verizon forever, however, has more to do with its work in 5G. The barriers to entry are so high in the industry that Verizon is likely to remain one of only three companies to boast a nationwide 5G network.
Verizon recently increased its dividend, which marked the 18th consecutive year the company's board approved a quarterly dividend increase. Currently Verizon's dividend yield sits at a juicy 6%, and with its acquisition and work with 5G, the company can be held forever.
EV woes
Ford Motor Company's (NYSE: F) upside is almost addition by subtraction. While its Ford Blue and Ford Pro divisions are busy printing out profits, Ford's model e unit, responsible for electric vehicles, is doing the opposite and is projected to lose up to $5.5 billion in 2024 alone.
The iconic automaker isn't sitting by letting losses mount, however, and has delayed as much as $12 billion in EV investment. Management was spending 40% of capital expenditure on EVs, but that has been slashed down to 30%. Ford has canceled a line of EV SUVs, minimized plans of a battery factory, and attacked the cost structure of its EVs with a "skunkworks" team aiming to develop a low-cost platform targeting prices around $25,000.
The auto industry's transition to a future of EVs has been slower than anticipated, and losses might drag on longer than investors would like. But eventually if Ford just breaks even with its model e division, it'll be a huge boost to the bottom line and its ability to increase dividends going forward.
The automotive industry is cyclical and also going through an EV revolution, and investors would be wise to hold a stock like Ford long term as it works through its headwinds and reverses EV losses. At current prices Ford's dividend sits at a yield of 5.7%, and often offers investors supplemental dividends when it has extra cash.
Buy and hold
These three stocks give investors a way to play the booming renewable energy industry, own limited access to the future of 5G, and profit as automakers bring down the prices of EVs. All three companies offer dividend yields that exceed 5%, and they are certainly stocks you can hold forever.
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Daniel Miller has positions in Ford Motor Company. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
