5 Top Stocks to Buy in April

So, global investors have closed out the first quarter and – despite all the negative news – stock markets have actually recorded solid gains in the first three months of 2023.

In the US, the S&P 500 Index rose close to 7% over the first quarter while the Nasdaq-100 Index delivered an astounding 17% increase, notching up its best quarter since the fourth quarter of 2020.

There has been no lack of uncertainty during the quarter, from the implosion of Silicon Valley Bank to the takeover of Credit Suisse.

That’s why any investor who had done nothing since the start of 2023 might be pleasantly surprised by the returns seen.

However, there are still a lot of unknowns for stock markets, including the interest rate path, persistently higher inflation and the very real possibility of a recession.

With that in mind, here are five top stocks to buy in April that can help investors prepare for tough times ahead.

1. Constellation Energy

When investors think of clean energy, they rarely think of nuclear power. But that’s a mistake because Constellation Energy Corp (NASDAQ: CEG) is helping drive the transition to renewables.

The company, which is headquartered in Baltimore, is the a leading provider of power and energy to homes and businesses across the US via its multiple nuclear power plants.

Constellation was spun out from public utility Exelon Corp (NASDAQ: EXC) in February 2022.

Investors may be surprised to know this but Constellation is in fact the largest producer of carbon-free electricity in the US (see below).

Source: Constellation Energy

And the company is also delivering positive growth. From adjusted EBITDA for the whole of 2022 of US$2.66 billion, Constellation is guiding for adjusted EBITDA in 2023 of US$2.9-3.3 billion.

With management’s goal to grow its annual dividend by 10% per year going forward, investors may like this clean energy stock that could do well no matter what the macroeconomic environment.

2. NextEra Energy

Up next is the world’s largest renewable energy company, NextEra Energy Inc (NYSE: NEE). On the one hand it owns a regulated utility – Florida Power & Light (FPL) – while NextEra also NextEra Energy Resources (NER), a leading North American clean energy firm.

As a result, the company has predictable and stable cash flows from its utility business, while also being able to invest substantially in renewable energy via NER.

That has resulted in ambitious plans for the firm. NER has 30 gigawatts (GW) of clean energy in operation – from wind and solar to nuclear and battery storage.

It has a further 19 GW of signed backlog projects across wind, solar and storage.

In June 2022, NextEra Energy also entered into an agreement to purchase a wastewater system in Pensylvannia – a good complement to its NextEra Water regulated utility in Texas.

Although small, this will allow the company to grow its revenue streams in future.

NextEra Energy has been growing its dividend at a compound annual growth rate (CAGR) of around 10% over the past 16 years and has been a Dividend Aristocrat since 2021.

3. Medtronic

In time of uncertainty, buying into healthcare stocks like Medtronic PLC (NYSE: MDT) appear to be a sound strategy.

Medtronic is a medical devices company that manufactures products across cardiovascular, medical-surgical, neuroscience, and diabetes.

It has a very predictable business given the constant need for medical devices and Medtronic is also a global company, operating in 150 countries and with its wares helping to treat over 70 medical conditions.

While total revenue for its latest Q3 FY2023 (for the three months ending 27 January 2023) was flat year-on-year at US$7.7 billion, management did guide for stable revenue growth in upcoming quarters.

Not only that but its free cash flow – of US$2.5 billion during the quarter – continues to help it fund its dividend.

The stock yields 3.4% and has paid out a rising dividend for 45 consecutive years.

4. Deere

When we think of tractors and farming, it’s not sexy. But that’s exactly what Deere & Company (NYSE: DE) produces and the company is vastly profitable.

The agricultural machinery giant has been producing the staples for farming for the past 180 years, having initially been founded in 1837.

The company’s first-quarter fiscal 2023 earnings blowout saw Deere notch up earnings per share (EPS) of US$6.55 versus analysts’ expectations of US$5.57.

Deere also raised its full-year guidance on strong demand for its equipment, given rising commodity prices and ongoing demand for food staples.

With a solid dividend, which has more than doubled since early 2018, the company is set to continue rewarding shareholders via dividends and share buybacks.

Currently, Deere shares give investors a dividend yield of 1.2%.

5. Texas Instruments

Finally, we have semiconductor player Texas Instruments Incorporated (NASDAQ: TXN). While it’s known for its grahic calculators, Texas Instruments is actually a vertically-integrated designer and manufacturer of lower-end analogue semiconductors.

These typically go into all sorts of devices, from industrial and automotive to communications equipment.

However, because it doesn’t manufacture cutting-edge chips, the company is able to deliver attractive gross margins for investors.

With a free cash flow yield of 30% (free cash flow was US$5.9 billion in 2022), Texas Instruments is a business which throws off an enormous amount of cash.

That came despite revenue being down 3% year-on-year in Q4 2022 to US$4.67 billion.

Texas Instruments has also been growing its dividend rapidly, notching up 19 straight years of dividend growth at a CAGR of 25% (from 2004-2022).

At its current price, Texas Instruments stock gives investors a dividend yield of around 2.7%.

Take a defensive stance with dividends

With the recent gains in global stock markets surprising investors, it is worth asking whether it’s sustainable given the likely recession on the horizon.

As a result, cash flow and profits are going to be highly valued. With that in mind, Constellation Energy, NextEra Energy, Medtronic, Deere, and Texas Instruments all provide some diversification for investors.

Even better, they also pay dividends that are growing a decent clip. Cash in your hand is worth a lot in times of uncertainty and dividends certainly provide that.

 

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of NextEra Energy Inc and Deere & Company.