3 Bear-market opportunities to build generational wealth | Job Binary


Bear markets can be difficult times for investors. No one wants to see their portfolio fall in value by more than 20%.

However, there may be a silver lining. Large companies often sell off in bear markets, allowing investors to build generational wealth over the long term. There are currently three high-quality wealth creators for sale Rockwell Automation (KR 4.23%), Brookfield Renewable (BEPC 1.81%) (BEP 0.97%)and NextEra Energy (NE 4.72%). Here’s why three Fool.com contributors look like great companies to own for those looking to build generational wealth.

Time to save

Reuben Gregg Brewer (Rockwell Automation): Today, the risk of a recession seems very high, as the United States has experienced two-quarters of its gross domestic product decline. This is an unofficial indicator of a recession. In these cases, the corporate playbook is pretty simple: cut costs. Rockwell Automation products and services help companies do just that. Still, the stock is down a third from its early 2022 peak.

Baby bears often take a bath in markets, so it’s no surprise. Interestingly, at the end of the company’s third fiscal quarter, Rockwell Automation said it had a record backlog of work in progress. Yes, it lowered the high end of its organic sales forecast, but it still calls for double-digit growth between 10% and 12%. Hard to complain about that.

This makes the stock’s sharp decline somewhat confusing, except that the dividend yield of around 2% at this point is roughly the middle of the range over the past decade. As such, Rockwell Automation appears to have gone from overvalued to roughly fair value, which isn’t too bad given the long-term trend for automation in the industrial sector and beyond. Indeed, buying this stock at a fair price is worth it if your goal is to pass the stock on to your heirs.

This proven wealth creator is for sale

Matt DiLallo (Brookfield Update): Brookfield Renewable has been an incredible wealth creator for many years. The renewable energy The giant has grown a $10,000 investment to more than $370,000 since its inception in 1999, generating a compound annual return of 17%. This is life-changing wealth creation.

The current bear market has given investors an opportunity to buy this wealth creator at a great price. Shares were recently down about 30% from their peak. Because of the lower share price, Brookfield now offers a dividend yield of 4.1%.

In addition to this attractive revenue stream, Brookfield expects to continue to grow rapidly. The company sees a trio of organic growth drivers driving annual growth of 6% to 11% through at least 2027 (inflation-related rate increases, higher electricity prices as existing contracts move to higher market rates, and development projects). Meanwhile, its M&A activity boosts its bottom line by an additional 9% annually. That’s an annual growth potential of nearly 20%, a potential acceleration from the roughly 10% annual growth rate it has shown over the past decade. That should easily support Brookfield’s plan to grow its dividend by 5% to 9% annually.

Add Brookfield’s dividend yield to its growth rate, and the company could deliver a mid-ten or higher total annual return in the coming years. Because of this, a 30% drop in its share price seems like a great opportunity to buy shares of this potential generational wealth creator.

Don’t miss out on double-digit declines in this stock

Neha Chamaria (NextEra Energy): It can be painful to see your portfolio fall in value during a bear market, but this is the time to make the most of your money; and nothing beats buying rock solid stocks to build generational wealth. Shares of NextEra Energy, for example, have brought cash to patient investors for years, making it a stock to buy on the dip. Shares of NextEra Energy are down nearly 18% for the month at the time of writing, and have returned 2.3%.

If you look at the 20-year stock performance graph below, it’s clear that dividends have played a large role in increasing the wealth of NextEra Energy’s long-term shareholders. That’s right, because NextEra Energy prioritizes dividends and even offers shareholders an excellent view of what dividend growth can expect over the medium term. For now, the clean energy giant expects to grow its dividend at a compound annual rate of about 10%. “at least” until 2024.

NEE chart

NEE data by YCharts

The biggest argument in favor of owning NextEra Energy stock for the long term is that its dividend growth should be well supported by the company’s expansion into high-potential clean energy. NextEra Energy, through its clean energy subsidiary Energy Resources, is the world’s largest producer of wind and solar power and has approximately 19.6 gigawatts under contract. This is 70% of the company’s existing clean energy capacity.

That’s huge, and with NextEra Energy diving into new technologies like green hydrogen, its growth opportunities should only expand in the coming years. There’s no denying that the world is transitioning from fossil fuels to renewables, so buying stocks in a leading company while they’re on the wane should pay off.

Matthew DiLallo has positions in Brookfield Renewable Corporation Inc., Brookfield Renewable Partners LP and NextEra Energy. Neha Chamaria has no position in any of the listed stocks. Reuben Gregg Brewer has no position in any of the listed stocks. Motley Fool Brookfield Renewable Corporation Inc. and holds and represents positions in NextEra Energy. The Motley Fool has a disclosure policy.



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