Down 9%, 11%, and 14% in 1 Month, These 3 Dividend Stocks Are Screaming Buys in December

Several pockets of the stock market have sold off in recent weeks, including the energy and utility sectors and consumer-facing companies. When a top stock sells off, but the long-term investment thesis remains unchanged, it can make the opportunity even more enticing.

Three Motley Fool contributors were asked to offer suggestions on top dividend stocks they see as buying opportunities right now. They suggested oil and gas producer Diamondback Energy (NASDAQ: FANG), renewable energy investor Brookfield Renewable (NYSE: BEP) (NYSE: BEPC), and Starbucks (NASDAQ: SBUX) as three solid dividend stocks with high yields to buy in December. Here's why.

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Diamondback Energy has plenty of potential to improve its dividend

Lee Samaha (Diamondback Energy): It's been a challenging year for investors in Diamondback, with the stock underperforming the S&P 500, but it's been a good year for Diamondback operationally.

Data by YCharts.

The price of oil is about $70 a barrel, similar to what it started the year at, and it spent most of the year above that price. In addition, Diamondback completed a transformational $26 billion transaction with Endeavor resulting in a merger.

The merger adds attractive Permian Basin assets (the most productive region in the U.S.) to Diamondback's existing Permian assets. In a recent update, Diamondback's management said: "We promised to drill and complete wells for $625 per lateral foot in 2025 on Endeavor's acreage. I can say that today, in real-time and two months post-announcement, we are averaging $600 per lateral foot across the combined Company."

Naturally, most investors focus on adding assets acquired in a deal, not least because the price of oil (and thus the value of the assets) tends to be volatile. Cost synergies are also generated when merging operations in a region.

Provided the price of oil is compliant, Diamondback is set to increase cash flow significantly, and by management's estimates, Diamondback's base dividend (currently equivalent to $3.60) is sustainable at a price of oil as low as $37 a barrel. The base dividend is equivalent to a 2.3% yield alone, and with Wall Street expecting $5 billion in free cash flow (FCF) in 2025 -- a figure representing 10.6% of its current market cap, there's plenty of potential to pay a hefty variable dividend as well.

Don't let political disinterest in renewable energy dissuade you from Brookfield Renewable

Scott Levine (Brookfield Renewable): While Brookfield Renewable nudged about 4% higher in 2023, the renewable energy powerhouse has fared considerably worse in 2024. Much of the stock's poor performance can be attributed to what investors fear is a less auspicious future for clean energy with the election of former President Donald Trump.

From the start of the year until Election Day, Brookfield Renewable had traded flat, but since Election Day, when the market learned that Trump would be returning as president, shares of Brookfield Renewable have plunged 16%. For renewable energy bulls -- or even just those looking to boost their passive income stream -- now's a great time to pick up Brookfield Renewable stock along with its 6.3% forward-yielding dividend.

Investors may have soured on Brookfield Renewable because of the election results, but they may be overestimating the impact of a Trump presidency. Granted, the Trump administration is enthusiastic about the domestic production of oil and gas; however, Brookfield Renewable has a significant global footprint -- a footprint that is seen in more than 20 countries and transcends the reach of potential Trump policies that don't incentivize renewable energy production in the United States. In 2023, for example, 37% of the company's revenue came from geographies outside of North America, and of the remaining 63%, a large percentage derived from the company's assets in Canada.

Should the company achieve its 2024 guidance, it will mean that it will have increased its funds from operations at a 12% compound annual growth rate since 2016, demonstrating the company's success even during the first Trump presidency. With shares valued at 4.9 times operating cash flow, a discount to its five-year average cash flow multiple of 5.9, now seems like a great time to warm up to Brookfield Renewable stock.

The sell-off in Starbucks is a buying opportunity

Daniel Foelber (Starbucks): Starbucks' stock price fell 9.7% last week, which is a big move considering there wasn't an investor update. However, the sell-off could be in response to a variety of factors.

• Coffee prices surged to their highest levels in 50 years due to supply shortages related to labor and climate factors.
• On Dec. 18, the Federal Reserve indicated it could slow the pace of interest rate cuts, leading to a broader stock sell-off.
• On Dec. 20, the Starbucks Workers United union went on strike in key markets, including Seattle, Los Angeles, and Chicago.The strike could impact sales during the holiday season -- which is a crucial time in the company's seasonal sales cycle.

Starbucks is embarking on a major turnaround. It all starts at the top, with former Chipotle Mexican Grill CEO (now Starbucks CEO) Brian Niccol brewing big plans for the coffee giant, including returning to the company's roots by creating an improved experience for workers and employees. Efficiency improvements identified by management during the last earnings call could boost operating margins without relying on price increases. However, higher input costs, such as from coffee beans, could negate those immediate improvements.

Still, Starbucks is a quality dividend stock with an attractive valuation to buy now. The company isn't even at the top of its game, and yet the stock has a price-to-earnings ratio of just 26.6. The sell-off has pushed the yield up to 2.8%. Starbucks may not be the growth stock it once was, but it is a much better deal from a valuation perspective. Starbucks' yield is high enough to make it a legitimate passive income powerhouse. Management has shown a steadfast commitment to the dividend, with 14 consecutive annual raises.

Starbucks is worth a closer look for investors who believe the company can improve its brand and chart a better path toward international growth -- especially in China, which has struggled in recent years.

Should you invest $1,000 in Diamondback Energy right now?

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Daniel Foelber has positions in Starbucks. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has positions in Brookfield Renewable. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends Brookfield Renewable and Brookfield Renewable Partners and recommends the following options: short December 2024 $54 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.