2 Magnificent S&P 500 Dividend Stocks Down 19% to 22% to Buy and Hold Forever | The Motley Fool

The S&P 500 (^GSPC -0.04%) index just hit an all-time high, buoyed by tech heavyweights and hopes of interest rate cuts. Yet some rock-solid dividend stocks that are part of the S&P 500 index are still way off their all-time highs, giving investors an excellent opportunity to buy.

These magnificent dividend stocks could not only generate decades of passive income for you, but even help you build wealth in the process. For instance, two such stocks have generated nearly 60% in total returns each in just the past five years. Here’s why you’d want to buy these two S&P 500 dividend stocks now and hold them forever.

37 years of consecutive dividend growth

Chevron (CVX -0.18%) has emerged as one of the most bankable dividend stocks in the energy sector. Despite the inherent volatility in oil and gas prices, Chevron has not only paid a dividend for decades now, but increased it for 37 consecutive years.

Chevron reported its highest production in history in 2023, partly driven by its acquisition of PDC Energy last year in an all-stock deal worth $7.6 billion. The oil and gas producer, however, is also expanding capacity in the Permian Basin and has already kicked off 2024 on a strong note, delivering a 12% year-over-year jump in its first-quarter production. At this pace, 2024 should be another record production year for Chevron.

Importantly, even as Chevron continues to invest in growth, it returned a record $26.3 billion in cash to shareholders in 2023, including $11.3 billion in dividends. Also, Chevron recently announced an 8% dividend raise for 2024 compared with a 6% hike in 2023.

There’s a solid case to be made now in favor of buying Chevron stock: It expects to grow its annual free cash flow (FCF) by nearly 10% through 2027 at Brent crude oil prices as low as $60 per barrel. Brent crude is hovering around $83 per barrel as of the time of this writing. Chevron has also improved its return on capital employed (ROCE) in recent years, which reflects management’s efficiency, since ROCE reveals how much money a company is making from all the capital it has put into its business, including debt.

Yet despite such a solid profile, Chevron stock is down nearly 19% from its all-time highs and yields 4.3% versus the S&P 500, which yields 1.3%. That makes Chevron one of the few S&P 500 dividend stocks to buy now and hold forever.

A no-brainer dividend growth stock to buy

NextEra Energy (NEE -0.16%) is one of the largest renewable energy companies in the U.S. The company stands out from the rest of the clean energy players, though, because of two factors.

First, NextEra Energy is the world’s largest producer of wind and solar energy, as well as a leading battery storage company. Second, it also owns and operates the largest electric utility in the U.S., Florida Power & Light (FPL) Company, which provides electricity to nearly 12 million customers across Florida. The two factors combined make NextEra Energy a dividend powerhouse, as its utility business provides stability while its renewables side offers growth.

NextEra Energy’s performance over the years has been nothing short of impressive. It grew its adjusted earnings per share (EPS) and operating cash flow by compound annual growth rates (CAGR) of 8% and 9%, respectively, in the last decade. That’s why the company could grow its dividend per share by 10% CAGR during the period.

It’s no surprise, then, that the stock has been a winner over time: If you’d invested $10,000 in NextEra Energy stock 10 years ago, you’d have nearly quadrupled your investment, including dividends.

NEE data by YCharts

Here’s why NextEra Energy is such a solid dividend stock to buy today: Despite projecting steady growth in earnings and dividends, the renewable energy stock is down nearly 22% from its all-time highs, even as the S&P 500 is hitting record highs.

At its 2024 Investor Day held on June 11, NextEra Energy reiterated its goal of growing its adjusted EPS by 6% to 8% through 2027 and annual dividend per share by around 10% through at least 2026, driven by massive investments in both its businesses. NextEra Energy expects to own nearly 81 (gigawatts) GW of renewables and storage capacity combined by 2027, which is more than twice its current clean energy portfolio in operation.

NextEra Energy stock’s yield of 2.8% may not be high, but its dividend growth alone could make you wealthy if you buy and hold this stock forever.