3 Dividend Stocks Worth Buying Near Their 52-Week Lows

While the broader stock market has continued to trend higher over the past few weeks, quite a few dividend stocks have sold off, hitting new 52-week lows. In some cases, these downward moves are justified, given negative developments and/or increased risks that these stocks could become yield or value traps.

But for these three stocks, investors appear to be overreacting, at least when it comes to near-term issues for British American Tobacco (NYSE: BTI), L3Harris Technologies (NYSE: LHX), and NextEra Energy (NYSE: NEE), and to how they really affect these companies' long-term prospects.

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British American Tobacco dips despite a stronger smokeless game plan

Shares in British American Tobacco, which is the parent company of U.S.-based RJ Reynolds, have fallen by around 7% year to date. Chalk this up mainly to the market's reaction to the cigarette company's Horizon 2030 "smokeless transformation" plans.

However, even as the stock keeps hitting new lows, including a recent slump to the low-$50s per share, short-term skittishness could work in the favor of long-term contrarian investors. For one, at current prices, the stock has a forward dividend yield of around 6.3%. The stock also has a strong track record of steady dividend growth over the past five years, averaging around 3% for the past five years.

Moreover, when it comes to British American Tobacco's high yield when weighed against cigarette obsolescence risk, the stock appears to be a stronger contender than Altria Group. While Altria, parent company of Philip Morris USA, has a slightly higher dividend yield of 6.6%, its smokeless transformation plans remain highly uncertain.

Meanwhile, British American Tobacco has at least a concrete plan to pivot from primarily selling cigarettes to primarily selling non-combustible tobacco and nicotine products, without affecting overall profitability. Alongside this advantage, BTI also trades at a slight valuation discount to Altria.

Recent troubles could spark a turnaround for L3Harris Technologies

Down nearly 20% year to date, L3Harris Technologies has tumbled due to a variety of factors. Despite continued strength with the defense contractor's missile business, concerns about reduced defense spending have outweighed this positive.

Christopher Kubasik's abrupt exit as CEO in August due to "code of conduct" violations has also weighed on L3's performance. However, Kubasik's exit and his subsequent replacement by Sam Mehta could prove very beneficial in the long run. After underperforming under Kubasik's watch, L3Harris' new management now has the opportunity to implement a turnaround plan.

Yes, with L3Harris trading in the middle of the pack valuation-wise among defense stocks, it may take a substantial improvement to earnings in order for shares to take off again. Still, given how much the market has rewarded faster-growing defense stocks in terms of valuation and the fact that the stock, although with only a 2.1% forward yield, has raised its payout for 25 years in a row, this suggests more long-term opportunity than meets the eye with L3Harris shares.

High uncertainty creates opportunity with NextEra Energy

NextEra Energy has fallen by only 4.3% year to date, but the fact that one of the most-followed utilities stocks is hitting new 52-week lows remains concerning. Many factors are likely driving this downward shift.

For one, the recent rate hikes have reduced the attractiveness of utility stocks, which are typically valued as much on their yield as on other metrics. Alongside interest rate-related tailwinds, there's also NextEra's pending merger with Dominion Energy. Uncertainty regarding the success of this deal may also be placing pressure on shares.

Yet while NextEra may be facing some challenges right now, its long-term merits remain intact. With over 30 years of consecutive annual dividend growth, the stock is less than two decades away from attaining Dividend King status, meaning a company that has raised its payout for 50 years or more. Currently, the stock has a forward dividend yield of around 3.25%.

Alongside its strong track record of dividend growth, the company is benefiting greatly from the artificial intelligence (AI) data center boom. This growth catalyst, coupled with potential cost and revenue synergies from the pending Dominion merger, could prove key to NextEra hitting its 8% earnings growth target over the next few years. This earnings growth, coupled with its plans to deliver at least 6% annual dividend growth over each of the next two years, could prove key to driving strong total returns for shares.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends L3Harris Technologies and NextEra Energy. The Motley Fool recommends British American Tobacco P.l.c. and Dominion Energy. The Motley Fool has a disclosure policy.