3 High-Conviction Dividend Stocks to Buy in September and Hold Forever
Key Points
Broadcom is still a buy, even at an all-time high.
Enbridge is a pipeline stock that can pipe consistent passive income into your portfolio.
Worried about a rising interest rate environment? Here's the stock to buy.
- 10 stocks we like better than Broadcom ›
Dividend stocks offer a way to participate in the stock while also boosting your passive income stream. But investors may question the value of an annualized dividend of a few percentage points when the S&P 500 (SNPINDEX: ^GSPC) is making new all-time highs.
However, long-term investors know that buying and holding dividend stocks can be a great way to balance out a diversified portfolio, making it easier to endure downturns. And there are plenty of dividend-paying companies that are participating in, or even leading, the market rally.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
Here's why these three Fool.com contributors selected Broadcom (NASDAQ: AVGO), Enbridge (NYSE: ENB), and Prudential Financial (NYSE: PRU) as top dividend stocks to buy in September and hold forever.
Image source: Getty Images.
1. Broadcom's AI growth is showing no signs of slowing down
Daniel Foelber (Broadcom): Broadcom is a textbook example of the flaws of judging a dividend stock solely by its yield.
Broadcom has increased its dividend for 15 consecutive years, and by over 14-fold in the last decade. But the stock price is up over 23-fold in the last decade, so Broadcom's yield has gone down. The last five years have added further pressure on the yield, as Broadcom's stock price is up 770% compared to an 81.5% increase in the dividend.
Without that massive run-up, Broadcom would be a high-yield stock. But because it has delivered such epic gains for its shareholders, its yield has compressed to just 0.7%. So Broadcom's low yield has nothing to do with a lack of dividend raises, but rather, that Broadcom has been a victim of its own success -- at least from a passive income standpoint.
Even at an all-time high and with a lofty valuation, there are still valid reasons to buy and hold the "Ten Titans" giant. Broadcom's artificial intelligence (AI) revenue was $12.2 billion in fiscal 2024, but Q4 fiscal 2025 guidance of $6.2 billion puts Broadcom on track to deliver just shy of $20 billion in fiscal 2025 AI revenue.
The company's acquisition of VMware and expansion of its AI semiconductor revenue have taken Broadcom from a legacy networking and hardware company once seen as a value stock to a high-octane, diversified tech giant that continues to play a pivotal role in leading the broader market higher.
Broadcom will likely increase its dividend for the 16th consecutive year when it reports its fourth-quarter fiscal 2025 results in December. The size of the raise will provide a clue to investors on whether Broadcom wants to continue using double-digit annual percentage dividend raises as a key way of passing along profits to shareholders, or if it would rather reallocate that capital toward accelerating its AI growth. After all, Broadcom just announced it landed $10 billion in new AI chip orders from a former prospect that has become a qualified customer. So it would be understandable if Broadcom shifted its capital return program, at least in the near term.
Broadcom stands out as one of the best AI growth stocks to buy now. But the dividend has transitioned from an integrated part of the investment thesis to a cherry on top of the growth narrative. So Broadcom is only worth buying for investors who don't mind paying a premium price for shares in a quality business.
2. Enbridge has a history of rewarding shareholders, and it shows no signs of stopping
Scott Levine (Enbridge): Enbridge, a prominent pipeline operator, might not be as thrilling as innovative AI stocks. But for income investors, companies like Enbridge are the bee's knees.
Generating strong and consistent cash flow, Enbridge is committed to rewarding shareholders, and with growth prospects on the horizon, there's reason to believe the company will continue rewarding shareholders for years to come. Those seeking reliable passive income, therefore, would be smart to fuel their portfolios with Enbridge and its dividend, which currently offers a mouthwatering 5.7% forward yield.
Operating a robust pipeline infrastructure, Enbridge estimates that it transports about 30% of the crude oil produced in North America and about 20% of the natural gas used in the United States. But wait, there's more. Enbridge is also diversifying its energy exposure and looking to expand its exposure to low-carbon technologies. The company, for example, has invested in 23 wind farms and 14 solar power facilities. These assets contribute steady revenues, providing management with strong insight into future cash flow -- insight that helps management to plan accordingly for future projects to grow the business further.
Logging a 30-year history of hiking its distributions higher, Enbridge has demonstrated a steadfast commitment to returning capital to shareholders. And though the company's previous achievements are no guarantee of the company's future performance, it's certainly worth acknowledgement as is management's cautious approach to the dividend. Targeting a dividend payout ratio that's 60% to 70% of distributable cash flow, management is clearly not willing to jeopardize the company's financial health to placate shareholders. And this isn't a pie-in-the-sky target. From 2021 through 2024, Enbridge averaged a 66% dividend payout ratio from distributable cash flow.
For passive income investors seeking a reliable dividend provider, Enbridge is a no-brainer stock to consider.
3. Some insurance for a stock portfolio, and a 5% yield doesn't hurt too
Lee Samaha (Prudential Financial): I hope I am wrong here. While the stock currently yields 5% and the company is financially sound and worthy, my case for buying it rests on the fear that long-term interest rates may remain higher for a lot longer than the market anticipates. Not wishing to belabor the point or enter the field of politics, but it doesn't seem to matter which administration is in charge; the outcome is more debt and more debt servicing requirements.
That can only pressure interest rates higher, and that's why it's good to buy some insurance for your stocks by buying the stock of life insurance companies. A life insurance company like Prudential Financial is worth buying in a rising rate environment because it needs to match its long-term liabilities with assets. It does this by buying relatively low-risk assets, such as government debt or high-quality mortgages.
When interest rates rise, the value of these assets will drop, but so will the net present value of a company's liabilities -- remember that assets match liabilities. As such, new premiums from policyholders can be invested in higher-yield debt. That's why life insurance companies do well in a rising rate environment.
Again, I hope I'm wrong, but there's nothing wrong with buying some protection for your portfolio in case rates stay high, and this is a great way to do it.
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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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