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Prepare Now for the Next Sell-Off: 3 Dividend Stocks for Your Wish List

Stocks sold off earlier this week on fears that a large Chinese property developer would default on its debt. The market has since recovered as those worried quickly faded.

However, this week's brief dip is a good reminder that volatility can come out of nowhere. That's why it's smart to have a plan of action. With that in mind, we asked some of our contributors for the best dividend stock to buy during market sell-offs. Here's why Eaton (NYSE: ETN), Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC), and Nucor (NYSE: NUE) topped their lists.

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Expensive for now

Reuben Gregg Brewer (Eaton): I bought Eaton many years ago, when the yield was up over 4%. The current yield is a miserly 1.9%. I've done pretty well, but, to be honest, the business performance over that span has impressed me even more than the stock gains. When I added this industrial giant to my portfolio it was just about done integrating a large acquisition that materially increased its presence in the electrical sector. My thought was that this was a good business to be in given the increasing importance of electricity in the world.

ETN Chart

ETN data by YCharts

However, since that point, the company has worked to exit older, lower-margin, and slower-growing businesses. That includes LED lighting, hydraulics, and some parts of its vehicle business, among others. And, while doing this, it has been augmenting its growth-oriented divisions, acquiring bolt-on businesses and building an electrical vehicle division from scratch (bringing together relevant parts in its existing operations). In other words, I looked at the investment as benefiting from a one-time change for the better, but changing for the better has proven to be an ongoing theme.

The stock isn't cheap today, noting its historically low dividend yield. But with a portfolio that is strongly aligned with the electrical future that appears likely to drive the world, it would be a great name to put on a wish list for a time when Mr. Market gets irrational again. A yield north of 3% would probably be worth the price of admission. And you can rest assured management is always hard at work trying to make this great company even better.

A great stock to buy when it goes on sale

Matt DiLallo (Brookfield Infrastructure): Brookfield Infrastructure has a phenomenal track record of growing shareholder value. Since its inception more than a decade ago, Brookfield has delivered an 18% total annualized return.

Fueling the company's success has been its ability to acquire and build out large-scale infrastructure platforms. This strategy has steadily grown its cash flow, supporting 10% annual dividend growth.

The company expects to continue generating strong results in the coming years. It has meaningful near-term growth. The company sees its cash flow per share jumping more than 20%. Driving that outlook is organic growth and its asset rotation program. That strategy includes selling mature businesses to finance higher returning acquisitions, including its pending deal for Inter Pipeline, a Canadian energy infrastructure franchise.

Meanwhile, Brookfield sees significant longer-term growth potential as the infrastructure supercycle plays out. Catalysts like the need for debt reduction by governments and corporations, U.S. government-driven infrastructure spending, data infrastructure growth, and transportation bottlenecks point to a significant increase in investment opportunities for Brookfield.

Given the company's track record, it's almost always a good time to purchase shares. However, investors can position themselves to earn a higher return if they buy during a market sell-off. That's because they get in at a lower price while locking in a higher dividend yield than the current 3.7%. For example, investors who bought during last year's market turbulence have earned a 34% total return over the previous 12 months. These factors are why Brookfield should sit at the top of any dividend investors' watch list so that they're ready to buy during the next stock market sell-off.

You simply can't ignore this dividend stock's potential

Neha Chamaria (Nucor): One stock that's bound to get knocked off in a market crash is Nucor, just like how it tanked in the Sept. 20 market crash. Such days are exactly when you'd want to pick up shares of this Dividend Aristocrat, which will become a Dividend King once it hits is 50th year of annual dividend increases.

Nucor has increased its dividend for 48 consecutive years now, and come December, it'll reward you with yet another raise. I'm certain a dividend increase is coming simply because Nucor is firing on all cylinders this year, having delivered record numbers for its second quarter and on pace to report yet another record quarter in the month October. With steel prices hitting record highs, I even expect earnings from Nucor's core steel segment to be up significantly sequentially in the third quarter.

Of course, these are near-term events, but Nucor's long-term prospects are equally promising, which is why this stock is a buy on any dip. The biggest catalyst on the horizon is President Joe Biden's infrastructure plan, which once passed into law should kick off construction spending and drive demand for key raw material, steel, higher. As the largest manufacturer of steel and steel products in the U.S., Nucor is one of the best infrastructure stocks you could buy now. And that, by default, also makes Nucor a top dividend stock to shop for when the market crashes.

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Matthew DiLallo owns shares of Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer owns shares of Eaton and Nucor. The Motley Fool recommends Brookfield Infra Partners LP Units, Brookfield Infrastructure Corporation, and Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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