Selling the Stock Market: 3 Stocks You’d Like to Buy on Every Dip

Volatility briefly returned to the stock market earlier this month. It was a reminder that sales can happen at any time and without any notice. The speed of the market’s most recent sell-off and subsequent recovery also showed that it’s good to have a list of stocks ready to buy during a sell-off so you can pounce when the opportunity arises.

Brookfield Infrastructure (BIPC 0.97%) (BEEP 1.45%), Nope (NOT 0.01%)and NextEra Energy (NO 1.50%) they are great stocks to buy during market sell-offs. Here’s why some of our Fool.com contributors think investors should buy them on any future dips.

A steady grower

Neha Chamaria (Brookfield Infrastructure): A sale is never easy; but when high-potential stocks get knocked down, smart investors know it’s an opportunity to grab stocks while there’s still time. Brookfield Infrastructure is one of the stocks you’ll want to buy on every dip for three reasons: (1) its assets can generate stable cash flows, (2) it’s growing steadily, and (3) management is committed to growing its dividend.

To put some numbers, Brookfield Infrastructure grew its funds from operations (FFO) by nearly 11% in the first six months of 2024. The company acquires and operates regulated assets in sectors such as utilities, transportation, intermediate energy and data infrastructure. and provides services under long-term contracts. This means it can generate steady cash flow even during tough times. In the meantime, it regularly reshuffles its portfolio to sell mature assets and reinvest the proceeds in projects with the potential for better returns.

Brookfield Infrastructure sold $1.4 billion worth of assets in the first half of 2024 and expects to raise another $2.5 billion in proceeds in the coming quarters. The company is already putting all that cash to good use, having so far secured or completed seven follow-on acquisitions in 2024 with a combined enterprise value of nearly $4 billion.

There is a lot of growth potential for Brookfield Infrastructure. It targets 10% FFO per unit and 5% to 9% dividend growth per share over the long term. With the partnership’s units yielding 5.4% (its corporate sister stock yields 4.4%), you can earn double-digit annual returns on this stock even during tough times.

Nucor continues to improve

Reuben Gregg Brewer (Never): The steel industry is cyclical and in recent years has found itself dealing with periods when cheap imports have flooded the US steel market. This has led to large price swings for industrial giant Nucor. While steel demand appears to remain broadly strong amid a construction boom in the industrial (near-support) and technology (data center) sectors, steel imports have picked up again. This has put pressure on sales and pricing after a number of very strong years for Nucor.

The bottom line is that Nucor’s financial results are currently in a downward trend. That’s why investors have been selling off shares of the steelmaker, with shares now down about 30% from recent highs.

NUE data by YCharts

But that’s actually pretty normal for Nucor, which has suffered numerous declines of at least that much over the past five decades or so.

However, Nucor has never rested on its laurels, focusing instead on consistently reinvesting in its businesses through good times and bad. This included upgrading its existing manufacturing assets and more importantly expanding its manufacturing capabilities. A key objective was to create value-added businesses that would allow Nucor to use its own steel to make higher-margin steel products such as racks for data centers and garage doors for industrial properties.

Basically, despite operating in a cyclical industry, Nucor has continually become a more valuable business. This has manifested itself over the long term in higher share prices, despite frequent price swings that can sometimes be a little hard to track. But if you can handle the volatility, buying when Nucor’s price drops has proven to be a great long-term plan.

A powerful wealth creator

Matt DiLallo (NextEra Energy): NextEra Energy has a long history of growing shareholder value. The utility has grown earnings at a compound annual rate of 9% over the past decade. That’s what he has gave him the fuel to increase its dividend by a compound annual rate of about 10%. This combination of earnings and dividend growth contributed to the robust strength total returns for its investors over years:

Image source: NextEra Energy.

Given the company’s prowess for producing above-average growth and returns, NextEra Energy typically trades at a premium valuation. Because of this, market sales tend to offer the rare opportunity to purchase this high quality stock at a more attractive valuation.

Buying cheaper shares would increase the investor’s ability to earn a strong return from NextEra in the future. The company is already in an excellent position to increase shareholder value. It expects to grow its earnings per share toward the upper end of its annual target range of 6% to 8% through 2027. It also plans to increase its dividend by about 10% per year at least until 2026. In the meantime, there is plenty of long-term growth potential from the side expected acceleration in electricity demand from AI data centers and other catalysts.

With a dividend yield of more than 2.5% and earnings growing roughly 8% annually, NextEra has the power to produce double-digit annualized total returns from here. Meanwhile, buying shares during a selloff would provide a higher dividend yield and lower valuation, enhancing the investor’s ability to generate strong total returns over the long term.