Down 9%, 11%, and 14% in 1 Month, These 3 Dividend Stocks Are Screaming Buys in December

In This Article:

Several pockets of the stock market have sold off in recent weeks, including the energy and utility sectors and consumer-facing companies. When a top stock sells off, but the long-term investment thesis remains unchanged, it can make the opportunity even more enticing.

Three Motley Fool contributors were asked to offer suggestions on top dividend stocks they see as buying opportunities right now. They suggested oil and gas producer Diamondback Energy (NASDAQ: FANG), renewable energy investor Brookfield Renewable (NYSE: BEP) (NYSE: BEPC), and Starbucks (NASDAQ: SBUX) as three solid dividend stocks with high yields to buy in December. Here's why.

Oil and gas equipment in a desert setting.
Image source: Getty Images.

Diamondback Energy has plenty of potential to improve its dividend

Lee Samaha (Diamondback Energy): It's been a challenging year for investors in Diamondback, with the stock underperforming the S&P 500, but it's been a good year for Diamondback operationally.

FANG Chart
Data by YCharts.

The price of oil is about $70 a barrel, similar to what it started the year at, and it spent most of the year above that price. In addition, Diamondback completed a transformational $26 billion transaction with Endeavor resulting in a merger.

The merger adds attractive Permian Basin assets (the most productive region in the U.S.) to Diamondback's existing Permian assets. In a recent update, Diamondback's management said: "We promised to drill and complete wells for $625 per lateral foot in 2025 on Endeavor's acreage. I can say that today, in real-time and two months post-announcement, we are averaging $600 per lateral foot across the combined Company."

Naturally, most investors focus on adding assets acquired in a deal, not least because the price of oil (and thus the value of the assets) tends to be volatile. Cost synergies are also generated when merging operations in a region.

Provided the price of oil is compliant, Diamondback is set to increase cash flow significantly, and by management's estimates, Diamondback's base dividend (currently equivalent to $3.60) is sustainable at a price of oil as low as $37 a barrel. The base dividend is equivalent to a 2.3% yield alone, and with Wall Street expecting $5 billion in free cash flow (FCF) in 2025 -- a figure representing 10.6% of its current market cap, there's plenty of potential to pay a hefty variable dividend as well.

Don't let political disinterest in renewable energy dissuade you from Brookfield Renewable

Scott Levine (Brookfield Renewable): While Brookfield Renewable nudged about 4% higher in 2023, the renewable energy powerhouse has fared considerably worse in 2024. Much of the stock's poor performance can be attributed to what investors fear is a less auspicious future for clean energy with the election of former President Donald Trump.