3 Top Dividend Stocks to Buy in December

With 2018 drawing to a close, it's a great time to back up your truck with investments that can help supplement your income in 2019 and beyond. Dividend stocks are one of the best ways to do it, and there's nothing better than if you can find top dividend-paying stocks with solid growth potential that are also trading cheap.

Our Motley Fool contributors have identified three such dividend stocks that you might want to consider buying right away: Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B), Brookfield Infrastructure Partners (NYSE: BIP), and Apple (NASDAQ: AAPL).

Superb capital allocation and a 6.3% dividend to boot

Maxx Chatsko (Royal Dutch Shell): On the surface, it may not seem the ideal time to invest in one of the world's largest oil companies. There are growing anxieties over climate change. Electric vehicles are expected to splash onto the global scene and steal significant market share from their petrol-powered counterparts by 2030. And younger folks aren't exactly big fans of the oil and gas industry, which creates future political risks for fossil fuel producers.

But contrary to popular belief, some of the world's largest oil and gas companies are also the largest investors in renewable energy. That includes Royal Dutch Shell, which is transitioning its asset base for a future reliant on natural gas and renewable electricity generation. It even recently announced that beginning in 2020, it will link executive pay to carbon emissions, setting new targets every three to five years and aiming to cut its carbon footprint in half by 2050.

To get there, Royal Dutch Shell is laying the groundwork for becoming a major electric utility with large investments and acquisitions in solar power generation and natural gas distribution. While each investment comes with strict requirements for generating profitable returns, this chunk of the portfolio still will take years to make a meaningful impact. In the meantime, investors can look forward to the budding opportunity in liquefied natural gas (LNG), which will be the most important weapon for toppling the world's biggest climate villain: coal power.

The oil major is one of the world's largest producers of natural gas, and its 12% share of global LNG markets in 2017 was the highest on the planet. Royal Dutch Shell has additional projects on the way, including LNG Canada, the first LNG export terminal to be built on the west coast of North America. It will have the most direct route to the world's top customers in Asia and, therefore, will pack a powerful punch in combating climate change by weaning South Korea and China off coal.

Considering the business generated more than $12 billion in operating cash flow in the third quarter of 2018, it has more than enough cash to fund its dividend, buy back shares, invest gobs more capital in renewable energy, and plow more money into LNG projects. With a 6.3% dividend and a stock price that's slid 12% since the beginning of the year, this is easily a top dividend stock to consider.

An underrated, cheap dividend growth stock

Neha Chamaria (Brookfield Infrastructure Partners): Brookfield Infrastructure Partners has had rough sailing this year, with shares losing nearly 15%, partly because of macro factors and partly due to decelerating funds from operations thanks to asset sales. But for a stock with visible cash-flow growth catalysts, commitment to growing dividends, and a juicy 4.9% yield, I'd say it's time contrarian investors get serious about Brookfield Infrastructure Partners.

From a business standpoint, Brookfield Infrastructure owns and operates assets in sectors like utilities, transportation, energy, and telecommunications. As these assets mainly offer essential services like electricity and gas, water, wireless telecommunications, energy distribution, toll roads, and rail networks, they bring in steady and predictable cash flows for the company. Brookfield Infrastructure, for its part, has done a pretty good job deploying that money into higher-margin assets while rewarding shareholders richly: Since inception in 2008, the company has grown its dividends at a compound annual rate of 11%.

Management is now targeting 5% to 9% growth in annual dividends, backed by investments worth $1.8 billion into six new businesses in the near term. That includes acquiring assets in high-potential markets such as India. For every $1 that it earns in funds from operations (FFO), Brookfield Infrastructure typically distributes around 65% of it in dividends and uses the rest for maintenance and growth capital expenditures. So every rise in its FFO should mean higher dividends for shareholders. All in all, Brookfield Infrastructure is a compelling dividend growth stock that you might want to own while it's still trading cheap.

Apple's stock is down but far from out

Chris Neiger (Apple): Apple's shares have taken a hit over the past few months, along with many stocks, on fears about the U.S. economy and concerns over how a trade war between the U.S. and China could hurt the company's device sales. Additionally, investors have been worried about a slowdown in iPhone unit sales. But there's still plenty of upside for this company for dividend investors.

First, Apple is in solid financial shape, and that's not changing any time soon. The company ended its fourth quarter fiscal 2018 with $237 billion cash, leaving plenty of room for the company to invest in new technologies, buy up smaller companies that it needs, and buy back more stock. Apple's been aggressive in repurchasing its stock lately, which has returned a lot of value to shareholders.

Second, while slowing iPhone sales aren't great to see, the company still has lots of opportunities from its fast-growing "other products" business -- which saw sales jump 35% in 2018 -- and its services business. Apple is on track to double its 2016 services revenue by 2020, thanks to the company's growing sales from AppleCare, Apple Pay, Apple Music, and the App Store.

Finally, income investors should keep in mind that Apple has a low dividend payout ratio of just 22.8%, which means it has plenty of room to increase its dividend in the future. Apple may not have the largest dividend, but the company's financial strength, growing opportunities outside the iPhone, and commitment to shareholders make the tech giant worthy of consideration as a dividend play. Add to all of that the fact that Apple's shares are trading at just 11.5 times the company's forward earnings, and Apple's stock is reaching bargain territory.

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Chris Neiger has no position in any of the stocks mentioned. Maxx Chatsko has no position in any of the stocks mentioned. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.