Since the start of 2026, the S&P 500 (SNPINDEX: ^GSPC) has generated total returns, aka price appreciation with dividends reinvested, of around 14% well above historical averages.

However, plenty of stocks have beaten the S&P 500 this year, and not just the hottest names in tech. In fact, there's one stock in particular, one that may not exactly scream "cutting edge," that has crushed it thus far in 2026, with total returns of more than 24%.

The stock? Altria Group (NYSE: MO), America's largest tobacco company and purveyor of popular brands such as Marlboro and Skoal, as well as the nicotine pouch brand On! The question now is whether Altria Group's shares will remain one of the top-performing high yield dividend stocks.

Image source: Getty Images

Altria Group has smoked the S&P 500 in 2026

At the start of 2026, investors were mixed on this Big Tobacco stock. At the time, concerns ran high about Altria's ability to adapt to changing nicotine and tobacco consumption habits. Namely, investors were concerned about the company's falling market share in smokeless tobacco and oral nicotine products.

As these products continue to gain or sustain usage rates, while cigarette smoking rates in the United States keep declining, Altria's future hinges heavily on the company making a successful smokeless transformation, much like its former subsidiary, Philip Morris International, has successfully accomplished.

However, during much of early to mid 2026, these concerns took a back seat. For one, due to better-than-feared quarterly results. Tobacco stocks in general also performed well during this time, on growing confidence in the industry's smokefree pivot, which inspired some institutional investors who had shunned the sector to reenter major stocks in the space.

Trading for as much as $77.06 per share in 2026, Altria tumbled back to the mid-$60s per share in August, on the heels of the company's Q2 2026 earnings release on July 30.

Recent pullback highlights long-term risks

For the quarter, Altria reported just 1.2% net revenue growth, with sales net of exice taxes rising to $5.35 billion. GAAP earnings came in at $1.37 per share, down 2.8% from the prior year's quarter, and falling short of analyst estimates.

Despite declining domestic cigarette usage, Altria has continued to raise earnings and, in turn, its dividend, thanks to cigarette price hikes and growth from its smokeless products. However, price elasticity with cigarettes may only go so far. While demonstrating some success with products like On!, this still pales in comparison to the success of Philip Morris International's Zyn nicotine pouches.

Since August, shares have inched higher, thanks to an announced 4.7% dividend raise and news of a contract manufacturing agreement with Philip Morris International that could help utilize excess production capacity .

Trading for 12 times forward earnings, and with a 6.4% forward dividend yield,Altria still seems cheap. Coupled with its high dividend and strong 2026 performance, it may still seem like a winner. However, this stock could still prove risky for the long-term health of your portfolio. If the company's earnings gambit starts to fail, earnings could take a dive, threatening the stock's Dividend King status and turning this deep-value winner into a yield-and-value trap.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

"Magnificent Seven" stocks like Microsoft and Amazon may still trade at or near all-time highs, but you may want to diversify your megacap positions. The "Mag Seven" may have surged thanks to the artificial intelligence (AI) boom, but their future success hinges heavily on AI spending.

There's nothing wrong with being bullish on the AI megatrend, but consider spreading your wagers elsewhere, to other high-growth opportunities. Take, for instance, another trend that isn't slowing down: the digitalization of payments. With this trend, one stock in particular fits the bill: Mastercard (NYSE: MA).

Image source: Getty Images.

Portrait of a payments tollbooth

Mastercard may be synonymous with credit cards, but neither Mastercard nor its competitor Visa (NYSE: V) issues payment cards. Banks issue the cards but use the companies' respective payment networks to operate them.

In other words, payment stocks like Mastercard don't carry consumer credit risk like bank stocks. Think of Mastercard and similar names as the midstream names among financial stocks: middlemen that collect a small fee on every card swipe or digital payment transaction processed through their networks.

Given the steadiness of this revenue stream and the fact that payment companies like this one built out their networks long ago, a considerable amount of this revenue flows straight to the bottom line. Take, for instance, Mastercard's fiscal results during the quarter ending June 30, 2026.

For the quarter, Mastercard reported $4.4 billion in net income, on $9.3 billion in net revenue. That's a net margin of over 47%. Better yet, alongside strong revenue streams, low capital intensity, and high margins, Mastercard has yet another feather in its cap: the prospect of further double-digit revenue and earnings growth in the years ahead.

Mastercard's growth edge

So I'm sure you're thinking: Why Mastercard over Visa? Why not both? Both valid questions. With both stocks trading at around 25 times forward earnings, competing in the same industry, and sporting similar forward dividend yields, I agree it seems odd to choose one over the other. That said, in terms of growth, many signs point to Mastercard having the edge.

Last quarter, when Mastercard reported 14% and 22% revenue and earnings per share (EPS) growth, respectively, Visa reported similar revenue growth, but EPS growth of just 10%. Even as Visa reported slightly stronger numbers on metrics such as cross-border volume growth and total payment volume growth, the long-term earnings growth forecast favors Mastercard.

While analyst forecasts call for Mastercard's EPS to grow 52% between 2026 and 2029, similar forecasts for Visa call for 46.2% EPS growth. That said, much as there's risk and uncertainty to the AI hyperscaler bull case, the digitalization-of-payments trend does not guarantee smooth sailing ahead for either.

Trading at a high earnings multiple, shares could experience a sharp pullback if future growth fails to meet or beat expectations. Events like a global economic slowdown could serve as a headwind. Visa shares also entail similar strengths and risks, but with growth potential serving as a tiebreaker, consider Mastercard the stronger long-term buy today.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Mastercard, Microsoft, and Visa. The Motley Fool has a disclosure policy.

Currently trading at around $1,160 per share, Eli Lilly (NYSE: LLY) has one of the highest stock prices in the S&P 500. While fractional stock trading means a high absolute share price doesn't hinder performance as much as it used to, there are other reasons a high price might. It may make sense for Eli Lilly to split its stock soon, something it hasn't done in nearly 30 years.

The company has yet to officially announce any sort of stock split plans. However, don't assume that, if it happens, a split will serve as a game changer for what is the most widely followed of the GLP-1 stocks.

Image source: Getty Images.

The key takeaway from stock split case studies

Eli Lilly has split four times since 1986, with the latest split implemented in October 1997. Today, the company, surging in recent years thanks to the success of its GLP-1 weight loss drug Zepbound, is in a totally different situation than it was in decades past.

It may be more useful to assess recent stock splits to gauge possible post-split price action in Eli Lilly shares. Three that come to mind are the 2024 10-for-1 stock splits of Broadcom and Nvidia, as well as the April 2026 25-for-1 stock split of Booking Holdings.

Broadcom and Nvidia are up 78.5% and 156.6%, respectively, since their splits. In the five months since implementing its stock split, Booking Holdings' share price has risen 11%. However, given that a stock split, which multiplies the share count and reprices the stock, does nothing to change a company's fundamentals, who's to say these gains are directly the result of the stock splits?

I would argue that these stocks went "splitsville" in the first place due to a surging stock price. Furthermore, as substance, not hype, drives stock prices over time, post-split gains came from strong results, not from a cheaper stock price, making shares more available to a broader range of investors.

What this means for Eli Lilly shares

Apply this thesis to the potential Eli Lilly stock split. It's clear that the underlying "story" behind Lilly's epic price rise will determine whether shares keep climbing in the aftermath of a split. Over the past year, Eli Lilly has surged by over 58%. The stock has pulled back recently, but a bevy of catalysts could put it back on an upward trajectory, even as it trades for nearly 32 times forward earnings, a massive premium to other pharmaceutical stocks.

For one, leveling up on the success of Zepbound, Eli Lilly is busy scaling up production and sales of its pill-based GLP-1 weight loss drug, orforglipron, marketed as Foundayo. It is also working to bring retatrutide, which clinical studies have demonstrated may lead to greater weight loss, to market.

Alongside its GLP-1 drug expansion, Eli Lilly is following industry trends by making a major move into immunology with its recent announcement to acquire Merida Biosciences for $2.9 billion. While a relatively small deal for this $1.1 trillion market-cap company, it could signal a further pivot into immunology through acquisitions.

If these developments enable Eli Lilly to continue meeting or beating growth expectations, split or no split, shares remain well positioned to perform.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Booking Holdings, Broadcom, Eli Lilly, and Nvidia. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) currently has a dividend yield of around 1%. Investing in the S&P 500 via index funds has historically produced solid long-term total returns, but for income investors, it's not necessarily the right vehicle for their specific objectives.

However, don't assume you need to trade stability for yield. Among Dividend Kings, or stocks with 50 years or more of consecutive dividend growth, there are stocks yielding considerably more than the market index.

A prime example of this is with Federal Realty Investment Trust (NYSE: FRT). Currently trading for around $116 per share, this real estate investment trust (REIT) has a nearly 4% forward dividend yield, practically quadruple that of the S&P 500.

Image source: Getty Images.

Portrait of a venerable REIT stock

Federal Realty Investment Trust was one of the first REITs. It was founded in 1962, not too long after legislation allowing for REITs was first signed into U.S. law. Having raised its dividend for 59 consecutive years, it's one of the Dividend Kings, the first and, for now, only REIT to hold this status.

Why has this REIT achieved this status, while other REITs, including those formed at the same time as Federal Realty Investment Trust, have not? Chalk it up to its focus on high-quality retail properties, located in markets such as Boston, New York, Washington, D.C., Silicon Valley, and Southern California, markets known for high real estate values, land scarcity, and, as this REIT itself puts it, "high barriers to entry."

A look at Federal Realty Investment Trust's latest financials underscores its status. In the quarter ending June 30, 2026, the REIT reported overall portfolio occupancy of 93.8% and a leased rate of 96.1%. Core funds from operations (FFO), the REIT equivalent of adjusted operating cash flow, increased 6.8% year over year. Reported Nareit FFO declined by 1.6%, but only because of a one-time tax-related item that raised reported results during Q2 2025. In the Q2 2026 earnings release, management inched up guidance and announced plans to increase its regular quarterly cash dividend by 3%.

The takeaway for all investors

For income investors, Federal Realty Investment Trust offers a nearly 4% yield, with a dividend growth track record suggesting its yield on cost will gradually rise over time. Add in the impact of inflation and redevelopment on this REIT's value over time, and there's strong potential for long-term capital appreciation as well.

This latter opportunity makes this a REIT for investors focused more on capital growth than portfolio income. In terms of dividend sustainability, with core FFO to come in between $7.48 and $7.56 per share this year, against $4.64 per share in total annual dividends, the stock effectively has a forward payout ratio of between 61% and 62%, leaving the REIT well positioned to keep paying investors quarterly, all while reinvesting and growing its property portfolio.

That said, it's not as if this REIT is a no-risk alternative to the S&P 500. Dividend growth has slowed in recent years. The 2020s rate hikes both negatively affected stock price performance and increased interest expenses, weighing on the bottom line. Nevertheless, normalizing macro conditions could temper these risks, getting dividend growth and price appreciation back on track.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Aerospace stocks are running hot. Benefiting from strong demand, literal highfliers like GE Aerospace (NYSE: GE) have rallied 22% over the past year. Other names, including TransDigm Group (NYSE: TDG), continue to sport valuations like those of tech stocks. However, not every aerospace stock is performing well and trading at sky-high multiples.

Take, for instance, Textron (NYSE: TXT). Although largely an aerospace company, it trades at a conglomerate discount due to its diversified portfolio of businesses. However, with Textron in the midst of splitting up, could it soon bridge the valuation gap?

Image source: Getty Images.

Textron, its valuation, and spinoff plans

At first glance, Textron's "conglomerate discount" to aerospace pure plays appears overdone. After all, while this stock trades for around 13 times forward earnings, TransDigm trades for around 25 times forward earnings. GE Aerospace is even more richly priced, at around 44 times forward earnings.

Back in April, management announced plans to spin off its industrial segment as a separate publicly traded company. After the spinoff, scheduled for mid-to-late 2027, the "new" Textron would consist of its Cessna and Beechcraft aircraft businesses, its Bell helicopter business, and its aerospace and defense technologies unit Textron Systems.

What a spinoff can't solve

I wouldn't jump to the conclusion that a spinoff of its noncore businesses turns Textron into the next TransDigm or GE Aerospace. It's not just the "conglomerate discount" weighing on Textron's valuation. When Textron last released quarterly earnings in July, the company reported just modest levels of earnings and sales growth, reiterated rather than raised guidance, and disclosed how its full-year guidance hinges on securing additional funding for the MV-75 Cheyenne Program.

Considering this, Textron needs more than just a spinoff of its industrial segment. Although spinning off low-margin businesses like its E-Z-GO golf cart brand will unleash an aerospace pure play, either Textron's core business will need to demonstrate improved results, or management must provide a concrete plan to reignite growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Aerospace and TransDigm Group. The Motley Fool recommends Textron. The Motley Fool has a disclosure policy.

United Parcel Service (NYSE: UPS), aka UPS, may be a famous company, but it is not necessarily a top choice among dividend stocks. Sure, shares in the parcel delivery company sport a high dividend yield of 6.2%, but concerns still linger about its ability to sustain such a high payout amid a years-long downturn.

Yet while UPS's 16-year dividend growth streak has ended, there's much merit in buying this stock today, both for its yield and for the potential for further upside from its ongoing turnaround.

Image source: Getty Images.

Investors remain on the fence about UPS

Over the past few years, UPS has been struggling to get over its post-pandemic hangover. While it has been getting better lately, the company has yet to hit its previous high-water mark for profitability. As seen in UPS's latest quarterly earnings, efforts such as pivoting away from low-margin Amazon orders toward higher-margin business customers are helping improve the bottom line.

But even as results beat expectations, investors reacted negatively. Again, concerns about future results and the dividend's future still linger.

Why dividend doubts are overdone

With annual dividend payments totaling $6.56 per share against forecasts calling for adjusted earnings of around $7.22 per share this year, UPS has a nearly 91% forward payout ratio. That ratio is well above what's considered healthy or sustainable.

Although UPS recently decided not to raise its payout, fears of a dividend cut remain. On the latest earnings conference call, CFO Brian Dykes reiterated plans to maintain the current payout rate. This suggests an opportunity to buy UPS today and collect its above-average yield while gaining exposure to the ongoing turnaround. Analysts remain confident in further improved results, with forecasts calling for earnings growth averaging around 7% between now and 2029.

Better yet, the stock could also rerate. UPS trades for 14.5 times forward earnings, while competitor FedEx trades for around 16 times forward earnings. If results meet current expectations and valuation converges, UPS, trading for around $105 today, could be trading north of $140 in three years' time.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.

With 55 years of consecutive dividend growth, Kimberly-Clark (NASDAQ: KMB) is one of the Dividend Kings. Despite this distinction, bearish sentiment persists for this consumer staples stock.

Why? Blame it on its pending acquisition of Kenvue (NYSE: KVUE). This deal, which adds brands like Tylenol and Band-Aid to Kimberly-Clark's existing portfolio of brands like Kleenex and Huggies, seems on paper to be a great opportunity for cost and growth synergies, but concerns about possible litigation risks persist.

Image source: Getty Images

Kimberly-Clark, the Kenvue deal, and the market's response

When Kimberly-Clark first announced the Kenvue deal last November, shares fell 15% immediately. By the spring, the stock had fallen more than 20% below pre-announcement levels. Yet while it's recovered since then, Kimberly-Clark remains down by around 8.1%.

The proposed merger is currently under regulatory review, but so far the deal appears set to close on schedule, sometime between now and the end of 2026. Mixed views notwithstanding, there are strong reasons for investors to be excited about this deal, rather than continuing to treat it as a great uncertainty.

Debunking the fear, uncertainty, and doubt

Deal skeptics have two key issues with the proposed merger. First, they believe that buying Kenvue, which was arguably spun off from Johnson & Johnson due to its sluggish growth, will result in an even larger slow-growing company. Second, there's the whole issue regarding allegations that Tylenol can cause autism and ADHD.

If lawsuits related to this prove successful, it could saddle Kimberly-Clark with significant liabilities. That said, consider these counterpoints. First, even partially hitting the $2.1 billion in projected annual cost and revenue synergies from the combination could significantly improve profitability.

Regarding litigation risks, consider that Kimberly-Clark was well aware of the legal risk related to Tylenol claims ahead of the deal. If profitability remains steady, or better yet, improves, Kimberly-Clark, which currently has a forward dividend yield of around 4.7%, will likely remain a Dividend King. Successful execution of the merger, coupled with better-than-feared litigation outcomes, could also bode well for the combined company's post-merger valuation.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.

Moderna (NASDAQ: MRNA) shares have made an incredible comeback this year. Up by nearly sixfold over the past 12 months, the stock, formerly one of the top COVID-19 vaccine plays, has surged thanks to developments with the non-COVID aspects of its pipeline.

The most recent surge, sending the stock up around 127% in a matter of weeks, stems from a breakthrough for the biotech company. Now, the question is whether Moderna can hold on to, much less add to, these latest gains.

Image source: Getty Images.

Moderna and its cancer vaccine super rally

Post-pandemic, investors bailed on what was once one of the most-followed biotech stocks amid pessimism about the company's ability to further monetize its mRNA technology. But then, as the company made further progress with its Intismeran Autogene vaccine candidate, bearishness shifted back to bullishness, turning Moderna into an incredible comeback story.

Then, on Aug. 19, Moderna, along with pharmaceutical company Merck (NYSE: MRK), announced positive top-line results for its phase 3 INTerpath-001 trial. This trial involved giving Stage IIB-IV melanoma patients a combination of Intismeran Autogene and Merck's Keytruda.

Separating substance from hype

On one hand, Moderna's super rally on the INTerpath-001 news made sense because this study strongly suggests that Moderna can succeed in employing its mRNA technology to develop effective oncology treatments. Given the massive total addressable market for such treatments, it's logical for the market to rerate shares significantly.

Then again, while the prospect of personalized cancer vaccines represents a serious game changer for medicine, keep in mind two things. First, the extent of Moderna's latest rally was likely boosted by a short squeeze. Shares initially surged by as much as 175% on the news and have since pulled back. A further cooldown in excitement could continue playing out.

Second, while by all means a likely game changer for Moderna, commercialization of these oncology MRNA products remains years away. With a nearly $60 billion market capitalization, estimated 2026 revenue of just $2.1 billion, and a stock price around $140 to $145 per share against forecast losses of $8.55 per share this year, future potential with oncology appears heavily baked in.

Even if bullish on Moderna's comeback catalyst, you may want to wait for further weakness before buying.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Moderna. The Motley Fool has a disclosure policy.

Enterprise Products Partners (NYSE: EPD) has raised its quarterly distributions for 29 consecutive years, never once reducing its payout. Despite midstream energy's steadiness relative to other segments of the energy sector, a track record of zero dividend cuts or suspensions is quite rare among pipeline stocks. Other large pipeline master limited partnerships (MLPs), including Plains All American Pipeline and Energy Transfer, have had to cut their distributions in the past.

A key reason for Enterprise's strong record is its approach to cash flow distribution. By taking a more cautious approach, this MLP's unitholders could continue to benefit from its payout consistency.

Image source: Getty Images.

Enterprise Products Partners and its well-covered dividend

In its quarterly earnings releases, Enterprise Products provides numerous financial metrics. One to pay particular attention to is the coverage of distributions ratio, which is distributable cash flow divided by distributions. Last quarter, this figure came in at 1.9x.

In other words, the MLP generated distributable cash flow nearly twice the size of distributions. With this high coverage, Enterprise is able to, on one hand, maintain and grow its nearly 5.75% dividend. At the same time, there's plenty of cash flow on hand to fund growth and expansion, reducing Enterprise Products Partners' need to borrow or issue additional MLP units.

Keeping an eye on this metric

Enterprise Products Partners is not for all investors. For those seeking stable gains, largely in the form of cash distributions, it's a solid opportunity. Keep in mind, however, that distribution growth has slowed down in recent years.

Moreover, if you do choose to buy Enterprise Product Partners, be sure to keep an eye on the coverage ratio. Each quarter, management presents this figure. If it starts to materially drop, it could be a sign that Enterprise is deviating from its historical approach, calling into question the sustainability of its future dividend growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

The Iran war has been going on for six months, with seemingly no end in sight. In the best-case scenario, the situation turns into a stalemate. Worst case, tensions and conflict escalate. Either way, it's not looking good for the Strait of Hormuz fully opening to shipping traffic.

With this, crude oil prices appear primed to remain elevated, which means jet fuel prices will remain high. Is this a sign to get out of airline stocks? Not necessarily. In large part, an industry trend has indirectly helped to lessen the impact of this major headwind.

Image source: Getty Images.

Rising jet fuel prices lead to differing outcomes for the airlines

When the conflict started, shares in major and low-cost airlines alike experienced a sharp pullback. That's unsurprising, as soaring jet fuel prices typically reduce airlines' profitability, even when they raise ticket prices in response. Worse yet, the conflict served as the final nail in the coffin for one particular low-cost airline.

On May 2, already-bankrupt Spirit Airlines completely suspended operations. Yet while some airlines have struggled with this headwind, for many other carriers, both low-cost and legacy, it's become a manageable issue.

Premiumization proves key to legacy carrier resilience

For low-cost carrier Allegiant (NASDAQ: ALGT), strategies like reducing off-peak flying, in tandem with higher ticket prices, have helped mitigate rising fuel costs. However, even after bouncing back during the summer, shares in this particular low-cost carrier have coughed back these gains.

In contrast, shares of United Airlines Holdings (NASDAQ: UAL) and Delta Air Lines (NYSE: DAL) have bounced back, with Delta trading above pre-war price levels. Why? These carriers have both raised prices to offset high fuel costs and have leaned into "premiumization," or a greater focus on affluent travelers, resulting in increased demand for premium tickets, making up for weakening demand from economy-tier passengers.

While the ongoing conflict could mean further uncertainty for low-cost carriers and for legacy carriers benefiting less from premiumization, like American Airlines, barring major changes to their respective financial performances, I wouldn't view the Iran war as a reason to sell United or Delta shares.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Allegiant Travel and Delta Air Lines. The Motley Fool has a disclosure policy.

In June, FedEx (NYSE: FDX) spun off an 80.1% stake in FedEx Freight (NYSE: FDXF), marking the start of the delivery giant's divestiture of its less-than-truckload (LTL) freight segment. Since the spinoff, both stocks have gone in different directions.

While shares in FedEx Freight's former parent have largely remained in a narrow range during the summer, FedEx Freight shares initially experienced a big rally, only to give back those gains, and then some.

Investors at the time of the spinoff received one share of FedEx Freight for every two shares of FedEx. The question now is whether it's time to exit both transportation stocks, keep one and sell the other, or let them both ride, viewing them as top industrial stocks.

Image source: Getty Images.

Is FedEx transforming into a lean, mean, parcel-delivering machine?

The spinoff isn't the only way FedEx has pivoted toward its core parcel delivery business. Last month, the company also announced the sale of its FedEx Supply Chain subsidiary. FedEx still owns 19.9% of FedEx Freight. It plans to divest the remaining stake either through exchanges of debt for common stock and/or by distributing them to shareholders.

Yet while FedEx still has skin in the game, management's focus now shifts toward executing its Network 2.0 strategic initiative. For customers, Network 2.0 represents a streamlining of FedEx's parcel pickup and delivery, but for shareholders, the main focus is the estimated $2 billion in structural cost savings.

Yet while long-term forecasts call for double-digit percentage earnings growth in 2027 and 2028, doubts remain. Fuel surcharges helped to mitigate the impact of soaring energy prices, but Amazon's move into the third-party logistics and shipping sector represents a major competitive threat to FedEx. Amazon is using tactics such as lower rates to gain market share.

Only time will tell whether Amazon affects FedEx's earnings growth, but keep in mind how success with Network 2.0 may already be baked into the stock's valuation. Right now, FedEx trades for 16 times forward earnings, a modest premium to rival UPS's forward multiple of about 14. For FedEx's efforts to translate into major gains in the stock, Network 2.0 needs to meet or exceed cost-reduction expectations. The company also needs to maximize customer retention amid the rising competition from Amazon.

Long-term FedEx investors may still want to sit tight. However, for anyone entering or adding to a position, you may want to wait for the next wave of turbulence.

FedEx Freight and its heavy "show me" discount

As an LTL freight-hauling company, FedEx Freight competes with companies like Old Dominion Freight Line. LTLs ship partial truckloads of goods for smaller industrial customers over shorter distances. The big opportunity for FedEx Freight lies in its discounted valuation.

Currently, FedEx Freight trades for about 25 times forward earnings. Competitor Old Dominion, on the other hand, trades for roughly 36 times forward earnings. Closing this valuation gap would mean major price appreciation for the stock.

However, don't expect FedEx Freight's valuation to rise simply because more investors are noticing this valuation discrepancy. It exists because Wall Street wants to see the company knock it out of the park in the coming quarters.

Much of this depends on the newly public company's execution, but external factors could also make or break the story. After softening, demand for LTL services is making a slow recovery. There's also the overhang of FedEx's eventual divestiture of its 19.9% stake. Depending on how quickly FedEx sells these shares, this could continue to weigh on FedEx Freight's performance.

Add in the fact that FedEx Freight also faces a competitive threat from Amazon, the key factor in the stock's initial post-rally pullback, and it's clear why Wall Street's staying in "show me" mode for now. Although a sentiment change would mean tremendous upside from current prices, consider waiting for concrete evidence that the situation is improving.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Old Dominion Freight Line, and United Parcel Service. The Motley Fool recommends FedEx and FedEx Freight Holding Company. The Motley Fool has a disclosure policy.

It's been a wild ride for Lucid Group (NASDAQ: LCID) shares this summer. In July, the stock briefly fell to $2.37 per share amid bankruptcy rumors. Shares sharply rebounded when the company denied these rumors, but since then, this floundering electric vehicle (EV) stock has fallen back into a downward spiral.

Why? Chalk it up to Lucid's latest quarterly earnings. The company once again reported heavy cash burn and results that fell short of expectations. Management also candidly conceded major flaws in its past execution. Yet while newly appointed CEO Silvio Napoli may have been trying to hit the "reset button," all this did was remind investors how Lucid remains a clunker among electric car stocks.

Image source: Getty Images.

Lucid, earnings, and the ongoing cash burn problem

Lucid reported earnings after market close on Aug. 4. Having released its delivery numbers a month earlier, investors already had a strong sense of the company's top-line performance. During the quarter ended June 30, Lucid produced and delivered 4,774 and 3,953 vehicles, respectively. For comparison, production and deliveries in the prior year's quarter totaled 3,863 and 3,309 vehicles, respectively.

Chalk up the 23.5% and 19.4% increases in production and delivery to the launch of Lucid's Gravity electric SUV. Given the higher base price of the Gravity line, investors expected a large year-over-year increase in revenue. However, while sales did increase 56%, to $405 million, topping analyst forecasts, investors focused more greatly on profitability, or the lack thereof.

During Q2, operating losses totaled nearly $1.1 billion, up from around $800 million during the prior year's quarter. Operating cash burn totaled over $1.2 billion, up from $830 million in Q2 2025. Making matters worse, management walked back its full-year deliveries guidance, from 21,000 to 19,000 vehicles. Management's discussion of its turnaround plans only underscored how Lucid remains a work in progress. With this, it's no surprise that the stock, after zooming back over threefold from its lows, has pulled back by nearly a third since earnings day.

Yet another warning for investors

For long-term investors, Lucid remains a losing proposition. Rival early-stage EV companies like Rivian Automotive may still face profitability challenges, but Rivian has at least reached a point where it's posting positive gross profit, all while scaling up toward six-figure annual vehicle sales volume.

Meanwhile, Lucid remains stuck resolving these key hurdles to success. Yes, with Saudi Arabia's Public Investment Fund (PIF) as its majority shareholder, Lucid still has a deep-pocketed backer by its side. There's little risk of the company going bankrupt anytime soon, even as it's burning through over $1 billion per quarter, with $3 billion in total liquidity.

Still, this only means that further financial support from PIF will lead to further share dilution. In the past six months alone, Lucid's share count has increased from 327.7 million to 394.1 million. Even if the situation improves, an ever-increasing share count will water down the upside.

With this in mind, stick to the sidelines, at least until some green shoots appear. Given how Lucid has fallen by 97.6% over the past five years, if a turnaround truly takes shape, it will likely take time for investors to warm back up to what was once one of the most popular growth stocks.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Since succeeding Warren Buffett as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) last January, Greg Abel has made some major changes to Berkshire's stock portfolio. In the two quarters since taking the helm of the Oracle of Omaha's holding company, Abel has both increased stock holdings and jettisoned many positions, including a few held for many decades.

However, Abel hasn't materially decreased Berkshire's positions in Apple, American Express, Alphabet, Bank of America, and Coca-Cola. During Q2 2026, Berkshire trimmed its BofA stake by 5.9%, while increasing its Alphabet position by 45.2%.

These five blue chip stocks now account for around 60% of its investments in U.S.-listed equities. Yet while this indeed represents high concentration, is that in itself a major risk? Not necessarily.

Image source: The Motley Fool.

High conviction led to high concentration

It's unfair to call Berkshire Hathaway's stock portfolio concentrated under Greg Abel's watch. After all, it was Warren Buffett's penchant for long-term, high-conviction investments that led to such high concentration in the first place.

Namely, that's the case with American Express and Coca-Cola, two of the longest-held Warren Buffett investments. Berkshire has held these stocks for over 30 years. Buying them at far lower prices than they trade for today, Berkshire's high concentration in them is due to long-term compounding. In his initial letter to shareholders, Greg Abel indicated that Berkshire's portfolio will stay largely concentrated in these names.

That said, Abel did leave the door open for Berkshire to "significantly adjust a holding if we see fundamental changes in its long-term economic prospects." That may be the story with BofA, which, as mentioned, is a position Berkshire continued to pare down. Abel's letter also said nothing about increasing a position, as has occurred with Alphabet. Last quarter, the company increased its position by around $17 billion.

Although attributed to Abel, don't discount Buffett's role in the increased allocation to Google's parent company. According to published reports, Buffett, who still serves as Berkshire's chairman, is the one who pushed for the increased stake.

A larger risk to keep in mind

Berkshire may have much of its stock portfolio in just five investments, but this overstates the extent to which these risks affect Berkshire Hathaway as a whole.

However, even if the largest equity position, Apple, worth around $70.5 billion, were to experience a severe drawdown, the net impact would be relatively modest. Here's how: If Apple fell 50%, the value of Berkshire's position would fall by $35.25 billion. That's a steep loss in absolute terms, but compare it to the company's $1 trillion market cap and $750 billion in shareholders' equity.

Also, in terms of liquidity, between its $365.5 billion cash position and its operating businesses, which generate around $45 billion annually, it's not as if Berkshire will be "forced" to sell in a cash crunch.

Still, there is a larger risk to keep in mind, if not concentration risk: performance risk. Irrespective of whether upping the ante on Alphabet is Buffett's or Abel's idea, Abel will own the outcome. Abel will also be "on the hook" for future investment choices, which, in the long run, will need to measure up to Buffett's track record.

Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, American Express, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

The S&P 500 may still be hitting new highs, but some stocks, including a few high-yield dividend stocks, have recently hit new lows. For these stocks, investors have soured on their long-term prospects. They expect them to wind up as "yield traps" or "value traps," where the stock's high yield proves fleeting or potential losses outweigh gains from their quarterly cash payouts.

Some of these stocks deserve these labels, but there are a handful where the market has arguably gone overboard with bearishness: Crown Castle (NYSE: CCI), Gaming & Leisure Properties (NASDAQ: GLPI), and Smithfield Foods (NASDAQ: SFD). Here's why.

Image source: Getty images

With Crown Castle, near-term worries contrast with long-term forecasts

Crown Castle is a real estate investment trust (REIT) specializing in the ownership of cellphone towers. At current prices, this infrastructure REIT has a forward dividend yield of around 5.6%.

Yes, management slashed the quarterly dividend back in 2025, from around $1.56 per share to $1.06 per share, in conjunction with a restructuring that included the sale of Crown Castle's fiber and small-cell tower business. This divestiture provided $8.5 billion for the REIT to pay down debt and increase share repurchases, but reduced operating cash flow.

Add in other issues, such as declining results, plus concerns about potential future competition from satellite-based networks like Space Exploration Technologies' StarLink, and it's no surprise Crown Castle shares have tumbled by around 26% over the past year. Still, the issues dragging down results today could prove temporary. Long-term forecasts call for Crown Castle's earnings to bounce back in the coming years. While you collect a 5.6% dividend today, in the long-run dividend growth and price appreciation could make this an even higher-yielding investment.

Gaming & Leisure Properties is another victim of casino slowdown worries

Gaming & Leisure Properties owns and leases out casino real estate. Regional casino operator Penn Entertainment is its main tenant, but the REIT also owns regional properties operated by PENN's competitors like Bally's. Recently, shares have hit new lows, on growing worries about a gaming industry slowdown. As a result of the pullback, Gaming & Leisure Properties now sports a nearly 7.5% forward dividend yield.

However, even if the gaming industry's prospects worsen, it's questionable whether this would affect dividend growth for Gaming & Leisure Properties. Its triple-net leases are subject to annual escalations. Even during the pandemic, casino operators honored lease agreements, continuing to pay during temporary shutdowns. This REIT also recently increased its quarterly payout by 5%.

Low payout ratio lowers "yield trap" fears with Smithfield Foods

Smithfield Foods shares recently tumbled after releasing quarterly results. Despite the company reporting 26.6% net income growth, investors reacted negatively to the meat processor's latest guidance revisions. Macroeconomic headwinds, such as inflation, continue to negatively affect meat demand.

However, Smithfield's relatively low payout ratio suggests that its high dividend yield of 5.6% may be sustainable. Currently, Smithfield has a payout ratio of around 51%. Compare that to competitor Hormel Foods, which has a payout ratio nearing 75%.

If Smithfield can sustain its dividend and ride out the current meat industry downturn, it could come out the other side trading at much higher prices than it does today. Other factors, such as Smithfield's further pivot toward branded products, as evidenced by its pending acquisition of Nathan's Famous, also suggest improved long-term results.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Crown Castle. The Motley Fool recommends Gaming And Leisure Properties. The Motley Fool has a disclosure policy.

After months of sideways price action, Gilead Sciences (NASDAQ: GILD) has started zooming higher. This comes on the heels of the pharmaceutical company's latest quarterly earnings release.

Trading around $130 per share ahead of earnings, the stock has since surged to around $146 per share. Further upside may be in the cards, mostly due to the key factor driving its post-earnings rally.

Image source: Getty Images.

HIV drug portfolio sends Gilead soaring

Gilead released its Q2 2026 results on Aug. 4. Admittedly, the earnings release was mixed at best. The biotech reported $7.8 billion in sales, up 10% year over year and ahead of forecasts . The company also recorded a net loss of $8.45 per share.

However, this figure was mainly due to significant in-process R&D charges related to the company's recent acquisition of several biotech companies, including Arcellx. These charges may hurt the bottom line today but could pay off if Gilead's ongoing oncology pivot proves successful.

Based on the stock's post-earnings rally, investors clearly forgave management for the losses, focusing mostly on the key positive with Gilead's latest results: continued success with its HIV drug portfolio. While flagship treatment Biktarvy keeps steadily growing in sales, the main milestone is with Gilead's portfolio of PrEP (HIV prevention) medicines, which hit over $1 billion in quarterly sales for the first time.

The post-earnings takeaway for investors

HIV product sales alone grew 12% during Q2 2026, with Descovy sales rising 48% and twice-yearly HIV prevention injection Yeztugo rising from just $15 million to $232 million. Better yet, management anticipates continued growth in the HIV drugs segment, including the prospect of Yeztugo reaching blockbuster status, with annual sales over $1 billion.

This, coupled with diversification efforts, points to strong results moving forward. Forecasts already call for Gilead's 2027 earnings to come in between $9.19 and $11.10 per share. This means Gilead could be trading for between 13 and 16 times forward earnings. With established biotech stocks like Amgen trading for nearly 20 times forward earnings, the potential runway for Gilead could prove substantial.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen and Gilead Sciences. The Motley Fool has a disclosure policy.

Back in August 2011, Home Depot (NYSE: HD) didn't look like a multibagger in the making. Shares had bounced back from the lows they sank to at the height of the Great Recession in early 2009, but they remained well below the high-water mark they had set around the start of the new millennium.

Looking back, however, that was an ideal time to load up on this blue chip stock.

Image source: Getty Images.

A five-figure nest egg

Over the past 15 years, total returns, or stock price appreciation with dividends reinvested, for Home Depot have totaled around 1,290%. For comparison, total returns for the S&P 500 (SNPINDEX: ^GSPC) index come to around 757% over the same time frame.

In other words, a $1,000 investment made in August 2011 would now be worth around $13,900. Not only that, based on Home Depot's current forward dividend yield of about 2.8%, that position would generate about $389 in annual dividend income. That would be a nearly 39% yield on the initial 2011 investment.

The key lesson for investors

Some factors driving Home Depot's stunning price appreciation over the past decade and a half may prove difficult to replicate. In 2011, the U.S. housing market was still near the bottom of its post-financial crisis trough. The 2010s housing market recovery, coupled with the pandemic-era boom in both home purchases and renovations, meant several extended periods of robust demand growth.

Home Depot's share repurchases during the 2010s further boosted earnings per share growth. Between 2010 and 2019, Home Depot reduced its share count by around 35%. As a result, Home Depot went from earning $2.47 per share in 2011 to $14.23 per share in 2025, an over fivefold increase. Add in other factors like multiple expansion, and it's easy to see why another 13x gain within the next 15 years may be unlikely.

However, this example could help you identify current stocks similar to Home Depot in 2011. Namely, look for out-of-favor stocks in industries that are at the bottom of their business cycles, trading at discounted valuations that suggest further trouble ahead. Finding such potential winners is not easy, but the challenge is what creates the long-term opportunity.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.

Boeing (NYSE: BA) recently announced a spate of major developments. However, one particular development taking shape this month likely caught the attention of a wide swath of investors.

On Aug. 10, Boeing announced plans to sell three of its aerospace and electric vertical takeoff and landing (eVTOL) businesses to Archer Aviation (NYSE: ACHR), one of the most followed eVTOL stocks.

Yet while this transaction has significant implications, the question is whether it meaningfully changes the story for Boeing shares.

Image source: Getty Images.

Archer deal turns divestitures into an opportunity

Numerous strategic and/or private buyers would likely have paid cash for eVTOL builder Wisk, drone maker Insitu, and air-traffic software company SkyGrid. However, by merging them into Archer, the company is turning what would be a series of routine divestitures into an opportunity.

Per the terms of its deal with Archer Aviation, in exchange for the three businesses, plus an agreement to make a $55 million equity investment in Archer, Boeing will receive a combination of newly issued shares and warrants in the eVTOL company.

Assuming the deal obtains regulatory approval and closes later this year, Boeing will own nearly 20% of Archer. This leaves the aerospace giant well-positioned to benefit from the start-up's further commercialization. That's not all. At the same time, Boeing retains the right to use Wisk's autonomous flight technology for its commercial and defense aircraft products.

What this means for Boeing stock

While the Archer deal could eventually produce billions of dollars in value for Boeing, for a megacap company with a $170 billion market cap, that's arguably a drop in the bucket. Still, by handing these businesses off to one of the emerging leaders in the eVTOL space, Boeing's management removes one more potential distraction from its plate.

The company remains hard at work getting its commercial aircraft business back on track. It recently made major progress in this area, as its 737 MAX 7 just received Federal Aviation Administration (FAA) approval. Divesting this business also provides management with more bandwidth to further grow and improve the company's defense aircraft business. Yet while all of this bodes well for Boeing's return to steady profitability and prior levels of cash flow, there's just one problem.

The upside from a turnaround appears well established in its stock price. Boeing trades for around 77 times trailing-12-month (TTM) earnings. That's a massive premium even to other high-flying aerospace stocks like GE Aerospace, which trades for around 40 times earnings. Management may anticipate a path toward $10 billion in annual free cash flow, but that's still below Boeing's $14 billion in free cash flow during 2018, prior to the company's fiscal performance tanking due to the 737 MAX grounding and COVID-era drop in aerospace demand.

While this transaction could incrementally improve Boeing's turnaround and provide a potential multibillion-dollar windfall, it's going to take a big pullback or a clearer picture of future profitability before this stock is in the long-term "buy zone" once again.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing and GE Aerospace. The Motley Fool has a disclosure policy.

Late last month, Tilray Brands (NASDAQ: TLRY) released its latest fiscal results and guidance updates. The market reacted positively to both, resulting in a modest post-earnings rally.

Since then, however, the bull run for one of the most-followed marijuana stocks has run its course. This is especially interesting, given that the U.S. legalization catalyst seems to be strengthening at the same time. Still, considering several factors, it is not surprising that investors appear hesitant to bid up Tilray shares.

Image source: Getty Images.

Tilray's earnings were not much of a game changer

Take a look at Tilray's latest quarterly financials, released on July 28, and you'd think that the Canada-based cannabis company had turned a corner. In the earnings release, management touted the company's "record revenue and adjusted EBITDA" and provided promising guidance for the coming fiscal year.

Yes, last fiscal year, revenue increased by 11%, to around $915 million, signaling that Tilray's getting close to hitting its $1 billion annual revenue target. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 11%, to $61.1 million. Adjusted net income, rising from $6.5 million to $12.2 million, nearly doubled as well. Even so, adjusted earnings fell short of sell-side forecasts. Worse yet, on a GAAP basis, Tilray once again reported heavy losses, with net losses attributable to Tilray shareholders totaling $49.6 million, or negative 43 cents per share.

Other factors keep investors hesitant about the stock

For fiscal year 2027, Tilray's management expects adjusted EBITDA of $68 million to $75 million, yet it's unclear whether this will translate into a swing to positive GAAP earnings. Management may also be touting how it's cut Tilray's debt to effectively zero, but it's doing so in a dilutive manner: through debt-for-equity swaps.

Even as the U.S. federal government's marijuana rescheduling efforts continue, Tilray has relatively limited exposure to this catalyst. Now diversified into areas such as alcoholic beverages and pharmaceutical distribution, cannabis accounts for just 29% of overall sales. Barring an end to share dilution, a significant improvement in results next quarter, or a big pivot back toward recreational cannabis, ho-hum price action will likely persist.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.

Over a 40+ year career on Wall Street, David Tepper has built a fortune estimated at $23.7 billion, mainly by making aggressive, concentrated wagers. First, he focused on the distressed debt market, building his Appaloosa Management into one of the largest and most successful hedge funds and earning him billions in the process.

Now, Appaloosa primarily manages Tepper's personal fortune. Instead of distressed debt, Tepper now mainly invests in large-cap tech stocks, most notably Amazon (NASDAQ: AMZN). According to Appaloosa's latest 13-F filing with the Securities and Exchange Commission (SEC), Tepper has around 16% of his nearly $7.5 billion stock portfolio invested in this "Magnificent Seven" stock.

Image source: Getty Images.

Tepper puts in more money as Amazon climbs on AI growth

During the quarter ending June 30, Tepper's Appaloosa increased its position in Amazon by 680,000 shares, or just under 15.8%. During this same time frame, Appaloosa reduced its Micron position by 41.4% and exited its Sandisk position entirely. The fund also increased its positions in Alphabet and Meta Platforms by 6.7% and 54.6%, respectively.

This strongly suggests a cycling out of "pick-and-shovel" artificial intelligence (AI) plays, into hyperscaler stocks. Tepper's fund may have made an aggressive pivot toward Facebook and Instagram parent Meta Platforms, but given that Meta accounts for only 5.1% of the overall portfolio, Amazon seems to remain the investor's highest-conviction bet on the AI growth trend.

Since the end of Q2, Amazon shares have continued to climb, most notably following the company's latest quarterly earnings report on July 30.

The market reacted bullishly to better-than-expected revenue growth numbers for Amazon Web Services (AWS), the company's cloud computing unit. Thanks to the AI infrastructure boom, AWS reported 37% revenue growth in the quarter, handily beating forecasts. Because of the strong growth, investors also reacted positively to CEO Andy Jassy's announcement that Amazon would increase its 2026 capital expenditure budget from $200 billion to $220 billion.

The best move for investors

While Tepper was still increasing Appaloosa's Amazon stake during Q2, it's unclear whether he's buying or selling right now since an SEC filing isn't due until the quarter is over. However, there's more to the bull case than "David Tepper likely still owns it." Buying Amazon represents a big bet on the continuation of the AI infrastructure build-out.

Based on last quarter's results, Amazon's heavy infrastructure investments are producing tangible growth. At 22 times earnings estimates, Amazon stock trades at a slight premium to its "Magnificent Seven" peers . For instance, Alphabet, Meta, and Microsoft currently trade at forward earnings multiples in the high-teens and low-20s.

However, a continued AI-driven growth resurgence for AWS could really pay off for investors who stay bullish. First, shares could keep rising in tandem with further earnings growth. Second, if strong results from Amazon, as well as other hyperscalers, emerge, AI stocks could surge, on the results themselves as well as due to improved sentiment for the sector.

That said, be mindful of the potential impact on shares of the AI bubble bursting. With the company's minority stake in AI start-up Anthropic further exposing it to the AI trend, this stock could get hammered back.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Micron Technology, and Microsoft. The Motley Fool has a disclosure policy.

Since taking over as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) at the start of this year, Greg Abel hasn't wasted much time. In less than nine months, Warren Buffett's successor has made quite a few major investments, including increasing Berkshire's position in Alphabet by $17 billion, as well as acquiring homebuilder Taylor Morrison for $8.5 billion.

Abel has removed numerous stocks from the Berkshire equity portfolio, most notably Mastercard, Visa, and UnitedHealth Group. Yet while Abel hasn't shied away from reshaping Berkshire's stock portfolio, there is one particular name among the well-known Warren Buffett investments that he'll likely not touch: Coca-Cola (NYSE: KO).

Berkshire's 9.3% stake in Coca-Cola, a $35.5 billion position that accounts for nearly 10% of Berkshire's overall stock portfolio, is one of the stocks most associated with the "Oracle of Omaha." Abel will likely continue to hold this position as is. Not out of sentiment, but out of cold, hard economics.

Image source: Getty Images

Why Coca-Cola became a bedrock position for Berkshire

Berkshire Hathaway first invested in Coca-Cola in 1988, steadily building up its position until 1994. Warren Buffett's holding company paid a total of $1.3 billion for the position. The position is now worth over 27 times its cost basis. Based on Coca-Cola's forward yield of around 2.4%, Berkshire generates around $850 million in annual dividend income. That's a yield-on-cost of over 65%.

In short, steady earnings and dividend growth led to consistent compounding for the Coca-Cola investment, making it a bedrock position in the Berkshire Hathaway portfolio. But why did Buffett buy it in the first place? Back in 1988, Buffett was motivated to buy Coca-Cola, despite Wall Street's concerns about it peaking in price, on the view that the company, with its strong cash flow, steady shareholder equity growth, and deep economic moat surrounding its beverage brands, made it a more-than-reasonably priced buy compared to its intrinsic value.

Time has arguably proven Buffett's thesis correct. Yet while the stock is no longer a value play today, there's a reason why Berkshire never sold it under Buffett's leadership, and likely won't under the leadership of Greg Abel.

The high cost of taking profit

Coca-Cola shares have surged by over 27% year-to-date. Following this latest rally, the stock now trades for 26 times forward earnings. That's pricey, even when compared to other blue chip consumer staples stocks.

However, just because Coca-Cola now trades at premium prices, don't expect Abel to rush to take profit. With a cost basis of just $1.3 billion, Berkshire would owe around $7.2 billion in federal corporate income taxes on the gain. With the $28.3 billion in after-tax proceeds, Abel would need to find an investment capable of generating returns superior to what Berkshire generates from its $35.5 billion stock position.

On the flip side, holding onto the position, it can continue to generate dividend income, funds that can be put into new investments. Portfolio income from the position will likely continue to grow, given the long track record of annual payout increases for this stock, one of the Dividend Kings. This leaves Abel better-equipped to make his mark elsewhere.

Thomas Niel has positions in UnitedHealth Group. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

During his three decades as manager of the hedge fund Duquesne Capital, Stanley Druckenmiller averaged annual returns of around 30%, beating not just the S&P 500 but also many other major hedge funds. Druckenmiller wound down his fund in 2010, converting it into a family office.This left him still highly active in the investing game, but just with his own money.

Investors can keep track of the Duquesne Family Office's positions by looking up its latest 13F filings with the Securities and Exchange Commission (SEC). Per the latest filing, submitted Aug. 14, for the quarter ended June 30, 2026, Duquesne's largest position is in Natera (NASDAQ: NTRA). This position, worth around $865 million, makes up 16.6% of Duquesne's overall portfolio. While the family office has continued to build up a stake in the diagnostics company, much of its value is the result of the stock's big run-up thus far in 2026.

The question now is whether more upside remains for shares, or if the stock, after its strong extended run, is at risk of an extended pullback.

Stanley Druckenmiller. Image source: Getty Images.

Natera and its recent hot run

Since the start of the year, Natera has rallied by over 37%. For comparison, the S&P 500 is up just a relatively smaller 13.9% over this same time frame. Cutting-edge healthcare stocks can make volatile moves, in either direction, and that's what has happened with Natera, following a spate of positive news.

Earlier in the year, Natera shares traded sideways, even as investors remained appreciative of the company's unique strengths. This includes its dominant share of the minimal residual disease (MRD) testing market, a key segment given the strong demand for products that help detect cancer recurrence. Still, despite such strengths, valuation worries became the greater concern.

However, following two key developments, valuation worries have moved to the back burner. First, in June, shares rallied on news that Natera had received regulatory approval in Japan for its Signatera product for colorectal cancer testing. Second, and more importantly, investors reacted very positively to Natera's latest quarterly results.

As insiders sell, should you keep following Druckenmiller's lead?

On Aug. 6, Natera released results for the 2026 second quarter. During this period, revenue increased 37.7% year over year, from $546.6 million to $752.8 million. The company also reported a more than 100-basis-point improvement in gross margins, as well as further progress in reaching profitability. Management also raised full-year revenue guidance, from $2.85 billion to $2.91 billion.

Alongside promising financials, Natera also keeps making progress in expanding the label for its products. After the aforementioned win in Japan, the company is now seeking regulatory approval for Signatera's use as a test for muscle-invasive bladder cancer.

With the company still unprofitable, and shares trading for 16 times sales, valuation remains sky-high among medical device stocks. Near-term profit-taking, or worse, investor disappointment over further near-term developments, could lead to another sharp pullback in shares. It also doesn't help that insiders continue to sell shares, showing little interest in increasing their own personal positions.

Still, it's likely not irrational exuberance that's leading Druckenmiller to keep buying. Long-term forecasts call for double-digit revenue growth to persist, with earnings turning positive by 2028. Wait for further weakness before buying, but the long-term bull case remains intact for now.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Natera. The Motley Fool has a disclosure policy.

Warren Buffett may have retired as CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), but the legendary investor is still quite active. While serving as chairman of the Omaha-based holding company, Buffett continues to periodically give interviews to the financial media.

A prime example is back in May, when the Oracle of Omaha lamented the rise of "gambling culture" within the stock market, stating, "We've never had people in a more gambling mood than now." This isn't the first time Buffett has compared short-term speculation to gambling, but these remarks, along with others made in this interview, could provide insight into where markets are headed from here.

In the same interview, Buffett noted that, in such a gambling fever environment, "prices for an awful lot of things will look very silly." While not certain, the current "fast-money culture" could give way to a financial market correction.

With this in mind, it may be time to consider some safe, defensive stocks. Here are three that, while not part of the current Berkshire portfolio, could thrive if today's chancy, speculative market gives way to turbulence: Johnson & Johnson (NYSE: JNJ), PepsiCo (NASDAQ: PEP), and WM (NYSE: WM).

Image source: The Motley Fool.

1. Berkshire used to own defensive healthcare stock Johnson & Johnson

Johnson & Johnson was once a Warren Buffett stock. Berkshire began building a position in the diversified healthcare company back in 2006, holding it for many years, before divesting it in recent years, culminating in a full exit from its position in 2023.

With the stock rising nearly 75% since then, you may think it is overvalued at around $250 per share today, assuming Buffett's $150-per-share sale was based on valuation. However, given success thus far with the company's pivot toward oncology, a faster-growing segment of healthcare, its big run-up appears logical.

Although pricier now than it was in 2023, if J&J's oncology catalyst continues to play out, the resulting earnings growth could help sustain or add to its valuation of around 22 times forward earnings. At the same time, J&J remains one of the highest-quality blue chip dividend stocks. One of the Dividend Kings, or companies that have raised their dividend payouts for at least 50 years, the company has raised its dividend every year for the past 65 years.

The stock currently has a 2% forward yield. Alongside a strong dividend growth track record, Johnson & Johnson also sports a AAA credit rating from S&P Global.

2. PepsiCo rivals a longtime Buffett holding

Coca-Cola, a stock held by Berkshire Hathaway since the 1980s, may be the best known among the Warren Buffett investments. However, PepsiCo's shares have many of the qualities long seen in Coca-Cola's shares.

For instance, PepsiCo has a strong track record of dividend growth. A Dividend King, just like Coca-Cola, the company has raised its dividend yearly for the past 55 years. The consumer staples stock is also a prime example of the types of defensive names that perform strongly during market downturns.

At the same time, PepsiCo may also beat Coca-Cola on fundamental-based investing metrics. The stock trades for only 16.5 times forward earnings, while Coca-Cola trades for over 26.5.

PepsiCo also has a higher forward dividend yield of 4.2%, more than double Coke's 2.4%. Yes, PepsiCo recently hit new 52-week lows as turnaround efforts struggle to counter macro headwinds in the near term. Even so, as those efforts stall, activist investor Elliott Management could further pressure the company to implement sweeping changes, such as selling off underperforming assets.

3. WM's "boring" business is a compelling buy-and-hold

WM, formerly known as Waste Management, may be one of the few companies whose corporate name fully describes what it does. On the surface, it may sound like a dull business, but there are advantages to making this "boring stock" a core holding in both bullish and bearish markets. No matter the macroeconomic backdrop, someone has to take out the trash.

The company has further leveraged the stability of the waste management business by aggressively acquiring other waste management companies. Long-term success with this "rollup" strategy has led to consistent earnings growth.

That said, valuation and yield are two trade-offs with this stock. Shares change hands for around 27 times forward earnings. WM's 1.6% forward yield is also much lower than many of the other blue chip dividend stocks listed previously.

Still, WM has built up a nearly two-decade dividend growth streak. Long-term analyst forecasts call for earnings growth to remain in the upper-single-digit/lower-double-digit range for years to come. This may help sustain WM's premium valuation, with the stock potentially rising in line with earnings growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and S&P Global. The Motley Fool recommends Johnson & Johnson and WM. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) may be hitting new highs in 2026, but for many high-yield dividend stocks, the story has not been so rosy. Numerous stocks with long track records of dividend growth recently hit new 52-week lows.

Although some of these names sank for good reasons and may represent value traps or yield traps, in a few situations, the market has clearly overreacted.

That's the case with the following dividend stocks: Comcast (NASDAQ: CMCSA), General Mills (NYSE: GIS), and Vici Properties (NYSE: VICI).

Image source: Getty Images.

Comcast could surge as it pivots back to its core business

Comcast started as a cable and telecommunications company, but over the past few decades, it has evolved into one of the top media conglomerates through its acquisition of NBCUniversal. However, in more recent years, it has begun divesting assets, starting with the spinoff of several cable television networks as Versant Media Group.

Now, Comcast is spinning off the rest of its media assets, including NBC, the Peacock streaming service, and the European pay-television company Sky, as a separate entity. Post-split, Comcast will become a telecom pure play again. Although there are some concerns about Comcast's declining broadband business, analysts remain bullish that the split will create substantial shareholder value, with Deutsche Bank analysts arguing in June that the "value unlock" could create upside of around 30%.

Investors buying into Comcast today can collect a dividend that, at the current share price, has a yield of just over 5%. The company has an 18-year dividend-hiking streak, with annualized payout growth averaging around 7.5% over the past five years.

With General Mills, collect a 6.3% yield while the turnaround takes shape

At the current share price, General Mills' dividend has a forward yield of around 6.3%. Shares are also inching higher after hitting a new 52-week low. Because it's a consumer staples stock, you might view it as a defensive investment, but in today's environment, branded food companies are struggling to compete with private label brands amid high inflation. The rising popularity of GLP-1 weight loss drugs has also cut into demand for processed foods.

Still, while such a negative backdrop may leave many concerned about General Mills' dividend growth prospects, especially as its payout ratio hits nearly 76%, another factor suggests that the company can build on its six consecutive years of dividend growth.

General Mills is in the midst of a turnaround, targeting $3 billion in operating cost reductions between now and 2030, with projected cost savings of $750 million for the fiscal year ending in May 2027 alone. If the restructuring is successful, it could spark renewed earnings growth and a further rebound in the stock price.

Past events counter tenant default fears with Vici Properties

Vici Properties, a real estate investment trust (REIT), has recently hit a new 52-week low. Concerns about declining tourism to Las Vegas have raised questions about its properties, which are concentrated on the Las Vegas Strip.

However, based on Vici's latest results, it's still prospering. Last quarter, revenue and adjusted funds from operations (AFFO) increased by 5.7% and 7.8%, respectively.

Vici's tenants have never defaulted, not even during the pandemic lockdowns. This suggests low rent default risk even if the Vegas slump continues. Vici Properties shares currently have a forward yield of nearly 7%. In recent years, annual dividend growth has averaged in the mid-single-digit percentages.

Thomas Niel has positions in Vici Properties. The Motley Fool recommends Comcast and Vici Properties. The Motley Fool has a disclosure policy.

Lowe's (NYSE: LOW) will report its fiscal second-quarter earnings before the market opens on Aug. 19. Much like its chief rival, Home Depot, the home improvement and building-products retailer's business has been stuck of late as it contends with soft demand. While Lowe's reported better-than-expected results last quarter, management maintained a soft outlook, setting low expectations for the year.

Lowe's shares are down by about 10.5% year to date. Already trading at a cheap valuation compared to its main peer, the stock could become even more of a bargain if investors react negatively to the upcoming earnings release.

Image source: Getty Images.

Lowe's Q2 fiscal 2027 earnings preview

For the quarter that ended on Aug. 1, sell-side forecasts call for revenue of $26.2 billion and earnings of $4.24 per share. That would amount to year-over-year sales growth of 9.3% and a 2% decline in earnings.

Lowe's has made some large acquisitions since last year, including Foundation Building Materials and Artisan Design Group. While those purchases have increased its top line, sluggish same-store sales coupled with higher interest expense and lower margins have led to less-stellar near-term bottom-line results. That said, these acquisitions, part of the company's pivot toward a greater focus on the contractor market, could pay off in the long term.

The best move for long-term investors

At best, Lowe's may see a modest post-earnings surge; at worst, lackluster results could trigger another pullback. However, such a dip could create an attractive entry point for those looking to open a new position in the stock or increase an established one.

Analysts' longer-term earnings forecasts are for Lowe's earnings to grow 7.8% next fiscal year and by nearly 10% in the following fiscal year. Lowe's, trading for around 17 times forward earnings, versus a forward multiple of 23.5 for Home Depot, may have room for multiple expansion in the years ahead as well.

On top of that, consider Lowe's dividend, which at the current share price yields 2.3%. The company is also one of the rare Dividend Kings -- businesses that have raised their dividends annually for 50-plus years. A track record like that reflects a company that puts a priority on its dividend and has a business model that supports further growth in its payouts. Irrespective of how Lowe's shares perform in the near term, the ingredients remain in place for the stock to deliver steady total returns over an extended time frame.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.

In recent weeks, two pharmaceutical stocks, AstraZeneca (NYSE: AZN) and Bristol Myers Squibb (NYSE: BMY), have become the subject of merger rumors. At the start of the month, the Financial Times dropped a potential bombshell when, in an exclusive report, it reported that the two companies, both considered blue chip stocks, were close to merging in a deal that would create an oncology-focused big pharma powerhouse worth around $400 billion.

Put simply, investors reacted negatively to the proposed deal, pushing AstraZeneca shares down by around 9% after the rumors first emerged. Subsequent headlines suggest that the proposed merger isn't likely to happen.

Still, until confirmed, it may be best to assume that a deal is possible. While on the surface, it may look like a winner, a closer look validates the market's more negative take on the proposition.

Image source: Getty Images.

Few cheers for the proposed pharma megadeal

Admittedly, it's not uncommon for an acquirer's stock to fall upon announcement of a megamerger. After all, if an acquirer is paying for the stock with its own shares, it creates the opportunity for merger arbitrageurs to short the acquirer and go long the target, locking in profits from the deal spread.

That said, as there's no announced deal or deal prices, the arbs haven't even entered the trade yet. Blame this decline on criticism of the rumored merger plans. On paper, there are substantial potential synergies between the two companies. Both are currently competitors in the oncology space. If combined, it could create a powerhouse in this segment of the pharmaceutical market.

However, the prospect of the combined entity having such a massive share of the oncology market would make it difficult for the proposed merger to pass antitrust regulators' scrutiny. Potential cost and growth synergies notwithstanding, AstraZeneca would also have to contend with Bristol Myers Squibb's looming patent cliffs or the loss of patent exclusivity for flagship drugs like blood thinner Eliquis and cancer therapy Opdivo.

In short, while possibly a good deal for Bristol Myers Squibb shareholders, investors in AstraZeneca arguably benefit more from a scenario where the U.K.-based pharmaceutical company continues to "go it alone," expanding its geographic and drug-type presence organically rather than through one large megadeal.

Your best move with either stock

Subsequent headlines suggest no pending deal, but stranger things have happened in the world of M&A. Given how negatively investors reacted to mere rumors of a deal, you can imagine what will happen to this stock if the company moves forward with one.

So, what does that mean for investors in either of these two healthcare stocks? Those holding AstraZeneca may want to sell into the strength of the latest relief rally. For reentry, I'd wait for confirmation that the company is no longer pursuing this deal. Shares trade at nearly 16 times forward earnings, a premium to most peers, despite long-term patent cliff concerns. The vagueness surrounding an uncertain and heavily criticized merger plan could lead to further volatility in shares in the short run.

As for the would-be acquisition target, Bristol Myers Squibb? Trading for less than 10 times forward earnings, its own headwinds remain heavily factored into its valuation. If you believe its own game plan to resolve its patent cliff issue will pan out, it may still be a great time to enter a long-term position.

I wouldn't, however, buy this stock merely on the prospect of the company getting acquired. Other "big pharma" companies may not face the same sort of antitrust scrutiny if they proposed a deal for Bristol Myers, but the market could still critique such a deal, given the unresolved patent cliff issue.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AstraZeneca Plc and Bristol Myers Squibb. The Motley Fool has a disclosure policy.

Target (NYSE: TGT) next reports quarterly earnings premarket on Wednesday, Aug. 19. Shares in the big box-turned-omnichannel retailer have surged by 57% since the start of the year. After falling out of favor last year, sentiment has shifted back to bullish, with strong Q1 2026 earnings bolstering confidence in Target's turnaround.

However, after this strong performance, Target, one of the most widely followed consumer staples stocks, could soon become the victim of elevated expectations.

Image source: Getty Images.

Target Q2 2026 earnings preview

For Target's fiscal second quarter ending Aug. 2, 2026, sell-side forecasts call for revenue of $26.1 billion and GAAP earnings of $2.26 per share, representing 3.5% and 10.2% growth, respectively, compared to the prior year's quarter.

But even if results once again exceed forecasts, the market could still react negatively if it deems the "beat" insufficient. The same could occur if Target merely reiterates its sales guidance rather than raising it again. After this year's strong run, investors may be looking for any excuse to sell. That said, it doesn't necessarily mean it's time for shareholders to head for the exits.

Stay focused on the long-term transformation

Under the leadership of CEO Michael Fiddelke, Target is both revamping its stores and pivoting toward a higher-margin merchandise mix. In the years ahead, Target could continue to experience steady earnings growth.

Don't get me wrong. With the stock already trading at 20 times trailing 12-month (TTM) earnings, and even long-term forecasts calling for modest earnings growth in the fiscal years ahead, I wouldn't count on shares rising into the mid-double digits anytime soon.

However, for investors seeking steady gains plus a cash-based return from its 3% forward yield, Target represents a strong long-term opportunity. And it's a Dividend King, meaning the company has increased its dividend for at least 50 consecutive years. If shares experience a post-earnings pullback, it could create a great price point for adding to or initiating a position.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

Home Depot (NYSE: HD) next reports quarterly earnings premarket on Aug. 18, 2026. So far this year, shares in the home improvement and building-products retailer have traded sideways, with Home Depot, one of the most widely followed retail stocks, up just over 3% year-to-date.

Weak fiscal results explain this tepid performance. Last quarter, Home Depot beat expectations on both revenue and earnings, yet the results underscored that macro uncertainty and a slow housing market continue to weigh on demand.

Image source: Getty Images.

Home Depot Q2 FY27 earnings preview

Last quarter, Home Depot reported nearly $41.8 billion in revenue and earnings of $3.43 per share. While the top line grew by 4.8%, same-store sales were up just 0.6%. Earnings were down by around 3.7% compared to the prior year's quarter. Chalk this up to a recent spate of acquisitions, which have increased overall revenue but have failed to offset bottom-line headwinds such as rising operating costs and continued weak demand.

The lackluster results, coupled with management's reiteration of its ho-hum guidance for the fiscal year ending January 2027, led to a muted positive reaction among investors. That said, since the last earnings report in May, shares have inched higher, from the $320s to the $350s per share. For the July quarter, analysts are expecting slightly slower sales growth of around 4.4%, plus a slight year-over-year gain in earnings per share, from $4.68 to $4.73.

Tread cautiously for now

If Q2 earnings play out anything like Q1, it'll likely take upward guidance revisions to drive increased investor excitement for Home Depot shares. Even then, with the stock currently trading for around 24 times forward earnings, it's almost as though the market already expects stronger growth in the coming quarters.

While Home Depot, bulking up during this sector downturn, could come back in a big way once the housing market recovers, stick to the sidelines -- at least until valuation becomes more reasonable or more evidence of an earnings resurgence emerges.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.

Since Greg Abel took over as the new CEO of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) in January, much of the headlines have been about his changes to Berkshire Hathaway investments like Amazon, UnitedHealth, and Alphabet.

But an overlooked development with Warren Buffett's successor may be the strong performance of Occidental Petroleum (NYSE: OXY) shares. Occidental shares have surged by nearly 36% since January, outperforming major indexes like the S&P 500 (SNPINDEX: ^GSPC), which is up 14% year to date, as well as other major oil stocks, including Chevron (NYSE: CVX), another top Berkshire Hathaway holding, which is up by around 22.5%.

The question now, as shares have delivered more muted performance in recent months, is whether a further rally is just around the corner.

Image source: Getty Images.

Occidental and its standout performance

Occidental's surge took shape earlier this year, when the escalation of the U.S.-Iran conflict led to a sudden surge in crude oil prices. At that time, shares in Occidental, commonly called Oxy, soared from the mid-$40s to as much as $67.45 per share.

Occidental's latest results underscore why investors were so primed to bid it up. For the quarter ending June 30, 2026, Occidental reported year-over-year revenue growth of 57%, with earnings rising 20-fold from the prior year's quarter.

As an oil and gas exploration and production company, Occidental has greater operating leverage than integrated majors like Chevron. That's bad news during energy price downturns, but it can serve as a powerful catalyst during boom times.

But as oil prices have pulled back since Q2 2026, moving wildly as the situation in the Mideast changes by the day, it's understandable if you think Occidental's hot run was a one-and-done event.

Oxy could still rally, but it's a largely binary bet

Following Occidental's sale of OxyChem to Berkshire for $9.7 billion, the company has reduced its outstanding debt by another $6.5 billion and, at the same time, become a pure play on fossil fuel prices. Will crude prices surge again? Despite a reescalation of Mideast tensions, oil has yet to hit triple-digit prices. A big reason for this is China.

In 2025, when prices were substantially lower, China stockpiled crude oil. This has enabled it to ride out the supply shocks simply by importing less oil. At some point, however, this stockpile will run dry. When, not if, China replenishes, prices could surge once again.

If this happens while the Strait of Hormuz crisis lingers, crude prices could spike again. In turn, Occidental's earnings could bounce back in a big way, well above 2027 estimates of $3.93 per share.

That said, while there's a long-term bull case for Oxy, many investors may prefer the less chancy setup with Chevron, also considered one of the blue chip dividend stocks. Chevron's bull case, built mostly on the successful execution of its five-year plan, already factors in Brent crude prices lower than present levels. For now, Abel appears content to hold both, but only time will tell how long that lasts.

Thomas Niel has positions in UnitedHealth Group. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum and UnitedHealth Group. The Motley Fool has a disclosure policy.

It's been a tough year for Netflix (NASDAQ: NFLX). Shares in what is one of the most popular streaming services are down by over 20% year to date and nearly 42% from their 52-week high.

Netflix hit a new 52-week low after its latest quarterly earnings release last month. This came on the heels of investor disappointment over the guidance updates. However, following this, investors may be coming to the same conclusion I did. Namely, that after the stock's lumpy drop over the past year, it's time for the dust to settle, especially as two catalysts could sway investor sentiment, justifying at least a partial recovery.

Image source: Getty Images.

Netflix and its lumpy drop since 2025

A year ago, Netflix traded for as much as $126.71 per share. Today, it's just under $75 per share. This steep decline has arrived in waves. Instead of steadily dropping since late 2025, the stock experienced a steep drop in late 2025/early 2026, a short-lived rebound in early to mid-2026, and another big drop in mid-2026.

Uncertainty surrounding Netflix's plans to acquire Warner Bros. Discovery drove the first pullback. This ended when Paramount Skydance outbid it. Backing out of the takeover battle brought relief to investors, who were concerned Netflix was overpaying for the media conglomerate.

With this latest pullback, concerns about future growth have been the key driver. The stock gave back its post-takeover-battle gains, and then some.

Why this latest rebound could last

Following Netflix's tumble over the past year, shares now trade for around 23 times forward earnings. In the past, shares have rarely traded at such a low multiple for long.

Although analyst estimates call for just 6% earnings growth next year, several factors could drive positive surprises in the quarters ahead. These factors include Netflix's surging ad revenue and its share repurchase program. Netflix still has board authorization to buy back up to $27.1 billion worth of stock, representing nearly 9% of its market cap.

With the slowdown already baked into its valuation, growth catalysts in motion, and a market perhaps ready to give the stock a second chance, consider Netflix a solid opportunity to "buy the dip" amid record-high markets.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.

Warren Buffett started giving away his Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) shares 20 years ago, but the legendary investor is speeding up the process. Last month, Buffett announced his plans to dispose of his remaining shares between now and Dec. 31, 2034.

On the same day as the press release, Buffett converted $6 billion in Berkshire Class A shares into Class B shares and donated them to several private foundations.

Interestingly enough, for the first time in 20 years, Buffett gave nothing to the Gates Foundation, opting instead to give only to various affiliated foundations, including The Susan Thompson Buffett Foundation, as well as the private foundations run by each of his three children.

While there's rampant speculation about why Buffett skipped out on the Gates Foundation this time, there is one more pertinent question on the minds of Berkshire Hathaway stock investors: How will this accelerating transfer of Buffett's stake impact the company and its shares moving forward?

Image source: The Motley Fool.

Buffett and the big transfer

Currently, the Oracle of Omaha holds a 13.2% economic interest in Berkshire Hathaway. This position is worth around $140 billion, implying that Buffett will give away an average of $17.5 billion each year for the next eight years.

However, it's as if these shared, once transferred, will immediately hit the market. The Internal Revenue Service (IRS) may require private foundations to donate 5% of their overall assets annually.

While Securities and Exchange Commission (SEC) filings from The Gates Foundation suggest that it has sold off the bulk of the $47 billion in Berkshire shares it has received over the past 20 years , Buffett's family foundations may opt to hold on to their gifted positions.

Even if the family foundations liquidate their positions, this is likely to happen gradually. Furthermore, Berkshire's present and future share repurchase plans could mitigate the impact of some of these shares hitting the open market.

A shift, but not necessarily a dramatic one

At the same time Buffett is initiating this great transfer, Berkshire Hathaway is seemingly shifting back to "buyback mode." According to published reports, the company has bought back between $5 billion and $11 billion worth of its own shares.

Berkshire has typically repurchased shares when it believes the company is trading below its intrinsic value. With nearly $400 billion in cash on hand, the company has plenty of capital it could return to investors. That said, it's not as if newly appointed CEO Greg Abel is looking to "dismantle" the Berkshire empire or even shrink it.

Although it still sits on a relatively large cash reserve, the company, under new leadership, has continued to make major deals and investments so far this year. Major transactions include Berkshire's $8.5 billion acquisition of Taylor Morrison and its $10 billion participation in Alphabet's $80 billion equity offering.

In short, while Berkshire's ownership may shift between now and 2034, it's not necessarily a dramatic one. Until subsequent developments suggest otherwise, don't expect Buffett's large transfer to materially affect the company's corporate governance, strategy, or price action.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.

After hitting a new 52-week low late last month, Tesla (NASDAQ: TSLA) has embarked on a rebound, with the stock surging from just less than $300 per share to around $325 per share. Yet while investor sentiment has shifted back from bearish to bullish, it's questionable how long said shift will last.

For one, this bounce-back may have had more to do with excitement surrounding the first earnings release from Space Exploration Technologies (NASDAQ: SPCX), aka SpaceX, Elon Musk's other trillion-dollar company. Also, while investors may be moving on from Tesla's poorly received July earnings release, turbulence may soon return, though it's not necessarily a warning sign for long-term investors.

Image source: Getty Images.

Tesla, SpaceX, hope, and hype

A look at Tesla's second quarter 2026 results justifies the stock's midsummer downward spiral. While overall sales increased 26% year over year, from $22.5 billion to $28.2 billion, non-GAAP (generally accepted accounting principles) earnings fell 18%, from $0.40 to $0.33 per share. Worse yet, operating income fell by a staggering 57% year over year, with the company's operating margins coming in at just 1.4%.

However, as soon as the market bailed on Tesla, investors jumped back in ahead of SpaceX's quarterly earnings release on Aug. 4. Both Tesla and SpaceX trade in similar patterns. There's also now increased attention toward numerous synergies between the two Musk-led companies.

So it's no shock that hope and hype surrounding SpaceX's earnings trickled over into Tesla's price action. Still, this dynamic, serving as a double-edged sword, could soon become a negative factor in the near-term Tesla stock forecast.

The best move amid renewed volatility

As SpaceX pulls back after earnings, Tesla may be on the verge of a similar reversal. Renewed fears about SpaceX's ramp-up in AI-related spending could reignite concerns that Tesla is doing the same. After all, concerns about increased AI spending did play a role in both Tesla's earnings miss and the market's reaction to them.

However, for investors bullish on Tesla's AI, robotics, and autonomous vehicle ambitions, this uncertainty could create a new long-term opportunity. Renewed volatility, including a retesting of recent lows, could work in your favor.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

Midstream stocks, or shares in companies that own energy assets like oil and gas pipelines and storage facilities, are an unglamorous yet highly profitable niche within the energy sector. Operating as a "toll road" type business, generating fixed fees largely unaffected by volatile fossil fuel prices, these companies can quietly mint profit during boom times and bust times in the oil sector.

This can create fantastic compounding potential for investors more concerned with capital growth. This holds especially true for owners of the following three pipeline stocks: Enbridge (NYSE: ENB), Enterprise Products Partners (NYSE: EPD), and MPLX (NYSE: MPLX).

Image source: Getty Images.

1. Enbridge: The slow and steady compounder

Enbridge is a diversified energy and utility infrastructure company. In addition to owning over 18,000 miles of pipeline across the U.S. and Canada, Enbridge operates a gas utilities company serving over 7 million customers. The company has also invested extensively in renewable energy infrastructure.

Diversification notwithstanding, it's Enbridge's midstream assets that make it a steady cash generator, enabling it to consistently raise its dividend over time. While the company's dividend growth streak currently stands at just three years, its quarterly payouts have grown by an average of 7.3% annually over the past decade.

With a forward yield of 5.1%, investors who choose to reinvest their dividends can grow an initial investment in this stock into a fairly large portfolio holding. Keep in mind that Enbridge's C-corp status has different tax implications than those of most midstream stocks, which are typically master limited partnerships (MLPs).

2. Enterprise Products Partners: Dividend growth royalty

Among dividend growth track records, few pipeline stocks match up to Enterprise Products Partners. For nearly 30 years in a row, this midstream energy MLP has raised its quarterly payouts, known as distributions.

For investors who held onto this MLP for decades, this has likely led to tremendous compounding over time, assuming they rolled over distributions into new shares. Enterprise Product Partners, by virtue of its MLP status, continues to pay out the lion's share of its pretax earnings as distributions.

As a result, this stock has a fairly high forward yield of nearly 6%. Payouts have increased by an average of 4% each year for the past five years. Per EPD's latest investor presentation, the MLP continues to drive for further per-unit cash flow growth through both organic growth and share repurchases.

3. MPLX: A high-yielder growing at an impressive clip

At first glance, you may look at MPLX's relatively high forward yield of 7.3% as a warning sign. Typically, if a stock has a higher-than-average yield, it's due to potential risks that could eliminate and/or outweigh such a high payout down the road.

However, a closer look suggests that MPLX may be many things, but it's far from a value trap. For one, this MLP, affiliated with Marathon Petroleum, has 10 years of consecutive payout growth. Over the past decade, distributions have grown by an average of 11.5% annually, including 12.5% distribution growth over the past year.

Looking ahead, MPLX continues to expand its asset base, bringing additional capacity online. With this, management anticipates that distribution growth of 12.5% could continue over the next two years.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

Compared to the overall stock market, Eli Lilly (NYSE: LLY) has delivered some fairly ho-hum year-to-date returns, rising just 7% since January. Yet there's a reason why it remains one of the most widely followed pharmaceutical stocks.

Eli Lilly continues to benefit greatly from the launch of its GLP-1 weight loss drugs. And on the horizon, a crop of new catalysts related to the stock's existing catalyst could get it firing on all cylinders once again.

Image source: Getty Images.

Eli Lilly and its next big catalyst

During Q1 2026, overall sales increased by 56% year over year, thanks largely to increased sales of tirzepatide, Lilly's "dual-agonist" GIP/GLP-1 treatment, sold under the Mounjaro name as a diabetes treatment, and as Zepbound as a weight loss treatment. Mounjaro sales increased 125%, while Zepbound sales were up 80%.

However, investors have already priced in tirzepatide's runaway success. Eli Lilly has been at work on retatrutide, a "triple G" agonist. According to phase 3 clinical trial data unveiled last month, the candidate "delivered substantial weight loss" among trial participants with obesity and related conditions, including type 2 diabetes and cardiovascular disease.

How soon could retatrutide drive the next rally?

Following the clinical trial, Eli Lilly plans to submit a Biologics License Application (BLA) with the Food and Drug Administration (FDA) early next year, suggesting a major project launch for 2027. This catalyst could soon have a greater impact on price action. Yes, investors more or less "sold the news" of the clinical trial data, as seen from the stock's recent pullback.

Eli Lilly's upcoming earnings release on Aug. 5 could spark further selling, especially as the stock remains far pricier than its peers at 34 times earnings. For better or worse, Q2 results will also provide a clearer picture of another Eli Lilly catalyst, the company's recently launched Foundayo pill-based weight loss drug.

Unless these results -- or guidance -- suggest otherwise, growth remains on track. Long-term Eli Lilly investors may want to hold rather than take profits, while prospective buyers could benefit if further profit-taking creates a better entry point.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.

As the stock market pulls back from recent highs, it may cycle gains into steadier, more defensive stocks, such as blue chip dividend stocks. From their earnings and dividend consistency to their strong track records of dividend growth, these stocks can be highly attractive during near-term volatility, yet they can also deliver strong long-term total returns.

Right now, these three dividend stocks stand out as names worth buying for yield, dividend growth, and long-term appreciation potential: Johnson & Johnson (NYSE: JNJ), Coca-Cola (NYSE: KO), and ExxonMobil (NYSE: XOM).

Image source: Getty Images.

Dividend King Johnson & Johnson remains a top choice

Johnson & Johnson is one of the Dividend Kings, or stocks with at least 50 consecutive years of dividend growth. For the past 65 years, the healthcare company has raised its quarterly cash payout. Over the past decade, these annual increases have averaged around 5.7%.

Currently, the stock has a forward dividend yield of around 2%. That may not sound particularly high, but over time, these payouts will become an increasingly larger contributor to total returns.

Much suggests that Johnson & Johnson can sustain mid-single-digit annualized dividend growth. Over the past few years, the company has jettisoned slower-growing segments. Most notably, its consumer products unit was spun off as Kenvue back in 2023.

At the same time, J&J has pivoted toward faster-growing segments of healthcare, such as oncology. Last quarter, the company's Tremfya psoriasis treatment reported 73% sales growth, generating $2 billion in revenue. Johnson & Johnson has also reached a long-awaited resolution to its talc product liabilities, with a recently announced $5.5 billion settlement.

All this could pave the way for the company's earnings to rise in line with analyst estimates. In 2026 and 2027, forecasts call for earnings growth of 8.2% and 9.8%, respectively. Such growth provides plenty of room for further dividend increases. It could also help the stock sustain its low-20s forward earnings multiple, in turn enabling shares to keep rising in tandem with earnings growth.

Don't expect Greg Abel to let go of Coca-Cola anytime soon

Since taking over from Warren Buffett as CEO of Berkshire Hathaway in January, Greg Abel has made some major changes. However, one you shouldn't expect Abel to make concerns one of the company's best-known holdings: Coca-Cola.

It's no mystery that Abel has held on to this decades-old equity position. Currently, Berkshire's 9.3% stake in the food and beverage company is worth around $35.6 billion. Based on Coca-Cola's 1.9% forward dividend yield, the position yields around $675 million in annual dividends, cash that Berkshire can put to work in new investments, altering its legacy asset base.

Moreover, Coca-Cola shares have performed especially strongly this year. Including dividends reinvested, shares have delivered a nearly 30% total return since January, versus just 7.6% for the S&P 500.

If a key factor in Coca-Cola's rally, an earnings growth resurgence, continues, Coca-Cola's strong run could continue as well. Management guidance calls for the company's earnings to grow between 9% and 10% this year. This could pave the way for higher dividend growth and further price appreciation, as improved earnings growth helps sustain Coca-Cola's current high-20s forward valuation

Multiple catalysts could fuel ExxonMobil's dividend growth

ExxonMobil has raised its dividend for 43 years in a row. That makes it just seven years away from reaching Dividend King status. Furthermore, I wouldn't count on the integrated oil and gas company falling short of this goal, given its exposure to catalysts beyond just the recent spike in crude oil prices.

Per the company's latest long-term strategic plan, management anticipates earnings growth averaging 13% between now and 2030. This forecast came out before the aforementioned spike in energy prices. ExxonMobil is achieving this through efforts such as cost-cutting and disciplined capital spending, as well as a pivot into new markets like carbon capture.

If forecasts play out as expected, ExxonMobil will have ample cash flow to continue raising its dividend by between 3% and 4% each year, as has been the case in recent years. The company also plans to utilize much of its excess cash flow for share repurchases, which is also a long-term catalyst for shares. At current prices, ExxonMobil has a forward yield of around 2.6%.

That may not sound particularly high, but this steady, slowly increasing yield, coupled with the impact of share repurchases and earnings growth on the stock price, could result in strong total returns in the years ahead. Consider this all the more reason to load up on this energy sector blue chip.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.

Realty Income (NYSE: O), the real estate investment trust (REIT) known for paying a monthly dividend, next reports quarterly earnings post-market on Aug. 4, 2026. Despite concerns like the potential for higher interest rates, Realty Income's shares have held up quite well in recent months.

Recent positive developments, including the stock's latest dividend hike, may explain this. Yet while earnings should provide new insight into the REIT's long-term prospects, I wouldn't view this as a "buy before" earnings situation.

Image source: Getty Images.

Realty Income Q2 2026 earnings preview

For Q2 2026, the quarter ending June 30, analysts expect Realty Income to report revenue of around $1.43 billion, and funds from operations (FFO), the REIT version of earnings, of $1.09 per share, representing 7% and 2.8% year-over-year increases, respectively.

Beyond the results themselves, other factors could prompt a bullish response from investors. For instance, further news of the net lease REIT's continued move into the data center space could bode well for the stock post-earnings.

On the other hand, negative developments could materialize, such as management having to walk back its FFO guidance after raising it, whether due to interest rate trends or other macro factors.

Stay focused on the long-term picture

Irrespective of Realty Income's pre-earnings and post-earnings price action, it's important to stay focused instead on the long-term picture. This REIT, which has paid a monthly dividend and raised its payout annually since going public in 1994, should continue to deliver solid returns if these trends hold.

Currently, Realty Income has a forward dividend yield of around 5%. Despite mixed payout growth in recent years, it could accelerate in the years ahead if efforts such as the data center pivot drive greater FFO growth.

If you're concerned about further rate hikes, hold off buying for now. However, if you believe rates will hold fairly steady from here, consider it a long-term buy, especially if shares encounter any post-earnings volatility.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.

Oklo (NYSE: OKLO) and NuScale Power (NYSE: SMR) remain two of the most popular nuclear energy stocks. However, there's a good reason why excitement about both companies has waned in the past year. Neither company has made much progress exiting the pre-revenue stage.

Oklo remains years away from commercialization

Oklo continues to announce major progress with its various projects. For instance, over the past month, the company has entered the testing stage for its Groves Isotope Test Reactor in Texas. Last month, the company announced progress on its Aurora project in southern Illinois by signing a nuclear fuel supply deal.

Still, commercialization remains years away. Analyst estimates call for revenue of just $1.1 million this year and $5.7 million in 2027. Compare that to Oklo's nearly $7 billion market cap, which seemingly bakes in future potential as a near certainty.

Oklo is also burning through hundreds of millions in cash each quarter, leaning on dilutive equity raises to shore up its balance sheet. After raising $1.2 billion from the sale of newly issued shares earlier this year, it could tap this funding source again.

Image source: Getty Images.

NuScale Power is also running behind

NuScale Power specializes in developing small modular reactors (SMRs). In 2024 and 2025, investors were very bullish on this nuclear technology start-up, given the potential of its SMRs to provide a scalable source of clean energy for artificial intelligence (AI) data centers.

Flash forward to now, however, and NuScale has fallen out of favor. While Oklo shares are down over 47.5% in the past year, NuScale has tumbled by nearly 84%. While NuScale already has Nuclear Regulatory Commission (NRC) approval to build SMRs, commercialization also appears, at best, to be many years away.

Most proposed commercial uses of NuScale's SMR technology remain in the negotiation stage. However, with a $3 billion market cap, investors have to pay up today for potential growth tomorrow. NuScale faces similar cash burn and dilution risks as Oklo.

Put simply, with advanced nuclear technology years away from the payoff stage, there's no rush to buy either Oklo or NuScale.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.

Rivian Automotive (NASDAQ: RIVN) will next report earnings post-market on Thursday, July 30. Shares in the electric vehicle (EV) company have traded sideways in recent months. Will this upcoming event drive the next big move for shares?

I wouldn't bet on it. After all, Rivian already reported delivery numbers earlier this month for the preceding quarter. Barring major changes to guidance or the company's efforts to scale up production of its lower-priced R2 line of vehicles, it's questionable whether earnings represent a turning point for this electric car stock.

That said, for long-term growth stocks like this one, it's best to stay focused on the big picture, rather than near-term volatility.

Image source: Getty Images.

Rivian Automotive Q2 2026 earnings preview

Again, investors aren't completely in the dark about how Rivian performed during the quarter ending June 30, 2026. On July 2, the EV maker released its Q2 2026 production and delivery figures. In Q2, Rivian produced 12,613 vehicles and delivered 12,194 vehicles.

These figures exceeded its prior delivery outlook of 9,000 to 11,000 vehicles, largely thanks to the successful launch of the aforementioned R2 vehicle line. Alongside strong delivery figures, management also raised its full-year delivery guidance from 62,000 to 67,000 vehicles to 65,000 to 70,000 vehicles.

While this may give credence to analyst forecasts calling for a 20% jump in sales during Q2 -- from $1.3 billion to around $1.56 billion -- it's unclear what increased deliveries mean for the bottom line. Per the same analyst forecasts, Rivian is expected to report GAAP losses of $0.78 per share for Q2 2026.

However, as GAAP losses came in far narrower than expected in Q1 2026, with reported losses of $0.30 per share versus a consensus of $0.72 per share, I wouldn't rule out the potential for positive surprises. The same could play out, with any updates to Rivian's full-year financial outlook.

The best move with this EV stock

Even if Rivian reports something surprising, such as far lower-than-expected losses or materially improved full-year guidance, it may not have the bullish impact on shares you might expect. For one, uncertainty about this stock goes beyond whether it can continue to scale up into a profitable automaker.

Whether improved results spark a rebound is another question entirely. As Rivian relies on the dilutive sale of newly issued shares to fund expansion, an increased share count could water down the positive impact of reaching profitability. Investors are still digesting Rivian's recent $1.5 billion capital raise.

Further tapping into this dilutive funding source puts pressure on both areas in the near term while limiting long-term upside. As this key risk persists, existing investors should hold on but wait for further developments regarding growth funding before increasing their positions. Those who have yet to buy Rivian shares may also want to wait until management answers these questions, rather than chasing this automotive stock after a post-earnings rally or pullback.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Since its initial public offering (IPO) back in June, the hype surrounding Space Exploration Technologies (NASDAQ: SPCX) has taken a serious breather. After surging from its IPO price of $135 per share to prices topping $225 per share, this popular name among space stocks has since given back its gains, and then some.

Worse yet, even as SpaceX has fallen back to Earth following moonshot moves earlier this summer, don't assume that shares in the Elon Musk-founded space exploration and artificial intelligence (AI) company have hit rock bottom. I think shares could fall by another 50% between now and Christmas for two key reasons.

Image source: Getty Images.

SpaceX's valuation math doesn't add up

Despite the recent pullback, SpaceX remains richly priced compared to its current operating performance. At around $110 per share, the company has a market cap of $1.45 trillion. Sell-side consensus calls for SpaceX to generate sales of $73.1 billion and earnings per share of $0.65 in 2027.

In other words, the stock currently trades for 19.8 times estimated 2027 sales, and around 169 times estimated 2027 earnings. I'm not the only one who believes this is a rich valuation for SpaceX. Recent research by Morningstar, using a discounted cash flow model, values the company at around $780 million, or less than half today's market cap.

An upcoming trigger for a pullback

Even if SpaceX manages to live up to sky-high expectations, there's another factor that could severely impact valuation in the months ahead. SpaceX's float of 281 million shares makes up just 2.1% of the dilution-adjusted overall share count.

The vast majority of shares remain in the hands of insiders, including Musk, as well as pre-IPO investors. These investors remain subject to a series of lockup provisions. In the months ahead, these lockup provisions will gradually expire, with a large portion expiring on Dec. 8, 2026. As these lockups end, it could put greater pressure on the stock. With valuation still sky-high and a negative catalyst looming, keep an eye on SpaceX stock, but don't buy it today.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Before the market opens on July 31, AbbVie (NYSE: ABBV) will report second-quarter results, hoping to build on the momentum from its Q1 earnings beat. As the key catalyst behind last quarter's performance remains in motion, the same could repeat when second-quarter results hit the Street.

But there could be a problem -- just a few weeks ago, management warned about the negative impact of one-time charges on the upcoming earnings release. Shares have continued to rally despite the warnings, but considering this and other factors, the stock could experience some post-earnings turbulence.

Image source: Getty Images.

AbbVie Q2 2026 earnings preview

The latest analyst estimates call for AbbVie to report quarterly earnings of around $3.61 per share, which would be a 21.5% gain from a year ago. This anticipated earnings rebound is not surprising. After all, AbbVie has managed to offset the impact of the loss of patent exclusivity for its flagship drug, Humira, thanks to the success of immunology treatments such as Rinvoq and Skyrizi.

The company is leaning further into immunology, with its pending $10.9 billion acquisition of Apogee Therapeutics, announced last month. Yet while AbbVie may have positives in its corner, don't be shocked if shares pull back after earnings, irrespective of whether earnings meet or beat expectations. AbbVie, one of the most widely followed pharmaceutical stocks, has been on a tear lately. After this recent rally, investors could use any excuse to "sell on the news."

The best approach ahead of earnings

Whether it's a possible earnings miss or simply guidance that fails to exceed the market's rising expectations, there are a few ways this upcoming event could trigger a pullback in AbbVie. However, if you are an existing long-term investor, don't view this as a reason to sell.

Staying put, collecting AbbVie's nearly 2.7% forward dividend, and waiting for AbbVie's immunology pivot to drive further earnings growth remains your best move. As for those who have yet to buy, any post-earnings pullback could create an opportunity to enter a long-term position at a more favorable entry point.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool has a disclosure policy.

Over the past 12 months, shares in cruise line operator Norwegian Cruise Line (NYSE: NCLH) have fallen by nearly 19%. As has been the case with other cruise ship stocks, concerns about the impact of Mideast geopolitical tensions on fuel prices and passenger demand played a big part in these declines.

Later this week, Norwegian Cruise Line reports its latest quarterly results. However, whether the results are strong or weak, I believe there is a much stronger long-term opportunity in this sector than Norwegian.

Image source: Getty Images.

Norwegian Cruise Line reports results for the June quarter pre-market on July 30. Sell-side estimates call for earnings of $0.39 per share, or around a 23.5% decrease from the prior year's quarter. Already aware of forecast declines, investors likely will pay greater attention to guidance updates.

Last quarter, again due to the Mideast conflict, Norwegian's management walked back its full-year 2026 forecast, anticipating earnings between $1.45 and $1.79 per share, a far cry from prior guidance, which called for full-year earnings as much as $2.38 per share. Still, even a slight adjustment, such as tightening the earnings range, could have a strong positive impact on sentiment toward the stock.

Although there could be a post-earnings rally, if the latest numbers prove better than anticipated, I would still skip Norwegian shares.

Trading for around 11 times forward earnings, it trades at a steep discount to competitor Royal Caribbean Cruises (NYSE: RCL), which trades for 17 times forward earnings. However, you can also pick up Carnival (NYSE: CCL) at a similar forward multiple as Norwegian. Not only that, Carnival is far less levered and currently pays a dividend, with a forward yield of around 1.7%.

Simply put, Carnival Cruise Lines stock represents a stronger risk/reward proposition and hence should be considered a contender for those bullish on the cruise line industry in the long term.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

Despite a challenging macroeconomic backdrop, airline stocks have performed well over the past year. This is especially true for Delta Air Lines (NYSE: DAL). Shares in the legacy carrier have soared by nearly 50% in the past 12 months, trouncing the performance of even the S&P 500, which has delivered total returns of around 18% during the same time.

The key takeaway with Delta's outperformance is not that the stock has thrived despite operational headwinds. Make no mistake: Delta hasn't made moonshot moves due to "meme mania." Instead, improved results have driven this stock's strong performance.

Moreover, even after Delta's wave of outperformance, shares could reach even higher altitudes in the months ahead. Here's why.

Image source: Getty Images.

Delta and its wave of market outperformance

Much of Delta's strong run occurred after this year's energy supply shock, not before it. Back in March, when the geopolitical tensions in the Middle East caused crude oil prices to spike above $100 per barrel, Delta and other airline stocks briefly pulled back. Yet during the spring and summer, Delta shares surged even higher. Admittedly, an easing in energy prices after the initial shock likely contributed most greatly to this resurgence.

Yet while Delta has pulled back since its latest quarterly earnings release, Q2 2026 results contained quite a few green shoots for the remainder of the full year. For one, during the preceding quarter, Delta largely absorbed the impact of higher jet fuel prices. While aircraft fuel costs increased by around $1.65 billion year over year, the carrier reported just a $238 million decrease in operating income.

Chalk up this resilience largely to continued success with Delta's "premiumization" strategy. The airline now generates greater revenue from first-class ticket sales and upgrades than from main cabin ticket sales. It's therefore not surprising that management reiterated its full-year earnings guidance of between $6.50 and $7.50 per share.

More room to soar if resilience persists

Investors may have reacted somewhat negatively to Delta's latest earnings, but don't assume this transportation stock's rally will keep reversing course. For results to meet or beat expectations, Delta needs to remain able to pass along the cost of higher fuel costs to passengers, while at the same time lowering capacity and maintaining similar levels of travel demand.

Put simply, I believe Delta can easily thread this needle, even as Mideast tensions and, in turn, fuel prices, spike once again. So far, travel demand, particularly for premium travel, has yet to ease. U.S.-based carriers also continue to reduce capacity. For now, the ingredients remain in place for Delta to deliver solid results this year.

If this occurs, and earnings hit the high end of the aforementioned forecasts, the impact on Delta shares could be tremendous, even if the stock experiences a moderate rerating to 15 times forward earnings. Apply this against the top end of analyst forecasts, and one gets a price target of around $112.50 per share, or over 37% above Delta's current stock price.

Given this potential if current conditions hold, Delta's post-earnings pullback represents a strong buying opportunity.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

When it comes to high-yield dividend stocks, it's not a matter of quantity, but of quality. There are numerous stocks with forward dividend yields of 5% or higher, but many of them are firmly in the "yield trap" category.

That is, either they are at risk of a dividend cut or of price declines that exceed the returns from their quarterly cash payouts. It's best to be selective with dividend stocks, but filtering for quality, a few stocks stand out as compelling long-term buys in today's market: Energy Transfer (NYSE: ET), Pfizer (NYSE: PFE), and United Parcel Service (NYSE: UPS).

Image source: Getty Images.

Energy Transfer offers a high yield and an AI growth catalyst

Energy Transfer is a master limited partnership (MLP) focused on owning midstream energy assets like pipelines. As a pass-through entity, Energy Transfer pays out most of its pretax income to investors as quarterly cash distributions. Based on the current distribution rate, this MLP stock has a forward yield of 6.6%.

Historically, Energy Transfer has steadily increased payouts by an average of 2% to 4% annually. However, payout growth could be far greater going forward, thanks to Energy Transfer's indirect exposure to the artificial intelligence (AI) megatrend.

AI data centers, hungry for energy, are boosting demand for midstream energy infrastructure. Capitalizing on this trend, Energy Transfer is targeting 3% to 5% annualized distribution growth in the years ahead. Assuming shares appreciate over the long term in line with distribution growth and this MLP continues to sport an above-average yield, this popular pipeline stock could deliver solid total returns for long-term investors.

"Yield trap" worries are overblown with Pfizer

Pfizer sports a nearly 7% forward dividend yield. Shares also trade at a super low 8.5 times forward earnings. With these metrics, some may see "super bargain," but others see "value trap," especially given Pfizer's weak fiscal performance in recent years.

However, poor sentiment for what has become one of the most undervalued pharmaceutical stocks could work in your favor. Yes, Pfizer continues to contend with dwindling demand for COVID-19 vaccines and treatments. The company also faces a major patent cliff in 2028, when it loses patent exclusivity on its flagship drug, anticoagulant Eliquis.

Still, the company expects the rest of its product lines to experience sales growth of 4% in 2026. Sell-side forecasts call for earnings of $2.94 per share, which, based on annual dividends of $1.72 per share, implies a forward payout ratio of around 59%. That may not be ideal, but if Pfizer can offset declines in COVID-19 and Eliquis sales with new products, it could sustain further dividend growth. Shares will likely rerate back toward a low-teens forward valuation.

United Parcel Service could keep stumping the skeptics

United Parcel Service, better known as UPS, has a forward dividend yield of 5.7%. The company has a 16-year track record of annual dividend increases, but payout growth has slowed in more recent years. There have also been concerns about UPS' high payout ratio, which could indicate a possible dividend cut down the road.

Yet while UPS may also give off some "yield trap" vibes, there's a reason why shares in the shipping company have bounced back in recent months. Despite concerns such as Amazon's decision to enter the logistics business, favorable developments, like rising freight rates, bode well for the space.

While analysts anticipate flat earnings growth this year, favorable pricing conditions could give way to stronger results in 2027. That's when consensus estimates call for earnings to increase from $7.13 to $8.02 per share. As earnings bounce and coverage of $6.56 per share in annual dividends further improves, UPS could provide steady cash returns while continuing its recovery. Consider it a buy now, but any subsequent wave of near-term weakness can make it an even stronger long-term buy.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Pfizer, and United Parcel Service. The Motley Fool has a disclosure policy.

Year to date, Teva Pharmaceutical Industries (NYSE: TEVA) shares have continued to recover. Thanks to the company's shifting focus from generic to branded drugs, this pharmaceutical stock has surged by around 85% over the past 12 months.

Although Teva may be pulling back lately, don't assume the turnaround rally is over. In addition to success with its initial round of commercially successful branded pharmaceuticals, the company has one key candidate in the pipeline that could be on the verge of becoming a blockbuster drug.

Image source: Getty Images.

Teva's branded drug transformation

As seen in Teva's first-quarter 2026 financials, generic drugs now barely make up a majority of the company's overall sales. Meanwhile, branded drugs, particularly recent hits like Austedo, Ajovy, and Uzedy, are experiencing mid-double-digit annual sales growth.

Management expects a drop in earnings per share (EPS), from $2.65 in 2025 to between $1.91 and $2.11 in 2026. However, much of this stems from the initial dilutive effect of Teva's recent acquisition of Emalex Biosciences. Starting next year, the anticipated launch of biosimilars, along with other factors, should contribute to a 30% increase in operating profit and adjusted EBITDA.. Furthermore, another emerging catalyst for Teva could drive the next big leap for shares.

The duvakitug catalyst

Next year, key drivers for the growth rebound include biosimilars, plus incremental sales growth for Teva's aforementioned flagship drugs. However, next year and beyond, duvakitug could be key to the company's further turnaround. The drug, which Teva co-developed with Sanofi, is currently in clinical trials as a treatment for ulcerative colitis and Crohn's disease.

If phase 3 clinical trial results prove as promising as recently released phase 2b findings, this drug could be on the fast track toward commercialization. Management has previously guided for duvakitug to reach between $2 billion and $5 billion in peak annual sales. Considering this, any progress with duvakitug could drive yet another massive rally, especially as the stock sells for less than 10 times estimated 2027 earnings. This strongly suggests taking advantage of near-term weakness by making this stock a long-term buy.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

For Canopy Growth (NASDAQ: CGC), as with most cannabis stocks, the next key catalyst has nothing to do with the industry or the economy. Instead, what will likely cause marijuana stocks to surge or sink from here has to do with an upcoming decision from the U.S. Drug Enforcement Administration (DEA).

This decision wouldn't resolve all of Canopy's regulatory headwinds, but since it could spark another round of bullishness, let's dive into the latest.

Image source: Getty Images.

The DEA, Schedule III, and what it could mean for Canopy Growth

The DEA's efforts to reschedule marijuana to Schedule III have been months in the making, with hearings on the matter only taking place recently. Legal experts seem confident that these hearings will lead to a decision that bodes well for the cannabis industry, but it's unclear whether a final decision will finally arrive.

Still, given President Donald Trump's executive order issued last December, which called for reclassification to occur "in the most expeditious manner possible," a final decision could arrive far sooner. While it's not a solution for all regulatory hurdles, it would signal that Canopy is moving closer toward consolidating its U.S. affiliate, Canopy USA, into the parent company. Canopy USA itself would benefit by being no longer subject to the deduction limitations imposed by section 280E of the Internal Revenue Code.

Buy now, or watch and wait?

So, is it time to buy Canopy ahead of the Rescheduling decision, or to watch and wait? Based on past price performance, I would go with the latter. Remember that in April, following the last bit of DEA-related legalization news, Canopy and peers surged briefly, then sank back down.

The same thing could repeat itself if the U.S. Federal Government moves ahead with a broad rescheduling of cannabis. Investors could bid shares up on the headlines at first, then retreat upon reading the details. As the best approach entails holding cannabis stocks as a long-term wager on legalization, not a short-term binary bet, waiting for the next round of regulatory progress to take shape remains your best move.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

After falling more than 35% over the past month, Rocket Lab's (NASDAQ: RKLB) latest price action may seem troublesome. However, this sharp pullback looks like an opportunity to bottom-fish in this popular space stock.

Yes, the shift in sentiment does have substance. After an initial wave of enthusiasm, investors are now having second thoughts about the company's recent acquisition plans. While this pending deal has negatives, its long-term impact on Rocket Lab's future growth and valuation could offset the initial uncertainty.

Image source: Getty Images.

Why investors turned bearish on Rocket Lab

On June 29, Rocket Lab, a satellite launch and manufacturing company, announced plans to acquire Iridium Communications (NASDAQ: IRDM) in an $8 billion cash-and-stock deal. As this transaction adds Iridium's satellite network and space telecom business to Rocket Lab's existing capabilities, post-acquisition, Rocket Lab could become a smaller version of Space Exploration Technologies, aka SpaceX.

In fact, it was these SpaceX stock comparisons that initially drove investors to respond positively to the deal announcement, rocketing the rocket stock from the mid $80s to just over $100 per share. Since then, however, shares have fallen back to Earth, and then some. Right now, the stock is hovering just around $70 per share. Initially intrigued by Rocket Lab becoming a possible "SpaceX in the making," the concern now is how this merger affects future growth.

A slowdown today, a resurgence tomorrow?

For now, weakness could persist with Rocket Lab shares. The market is still trying to figure out how to value a company that's diluting its growth rate by acquiring a more mature, already profitable business.

Yet while the initial growth dilution could weigh on shares, this deal could prove worthwhile in the long run. By acquiring a profitable business, Rocket Lab will have greater capacity to self-fund its organic growth efforts, including major projects such as its upcoming Neutron line of reusable rockets.

Also consider the deal's many likely cost and growth synergies. After a one-time slowdown could come a growth resurgence, driving a recovery in its shares. Given this, I'd consider going against the grain and doubling down on a position.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.

With the stock market trading sideways since the start of summer, concerns are running high about a possible near-term downturn. Rather than exiting the market, consider leaning into defensive names.

Blue chip dividend stocks are a prime example. These durable, high-quality businesses provide steady cash payouts each quarter, all while leaving the door open for long-term price appreciation.

Among dividend stocks in this category, a few stand out as strong opportunities right now: AbbVie (NYSE: ABBV), Chevron (NYSE: CVX), and PepsiCo (NASDAQ: PEP).

Image source: Getty Images.

AbbVie's comeback points to further dividend growth

Pharmaceutical company AbbVie has raised its dividend annually since being spun off from Abbott Laboratories in 2013. A few years ago, the company entered a rough patch due to the then-pending expiration of patent exclusivity for its Humira anti-inflammatory treatment.

However, thanks to the success of immunology therapies like Skyrizi and Rinvoq, AbbVie has experienced a rebound. Sales growth and operating income have bounced back. After making a further pivot toward immunology, through its pending acquisition of Apogee Therapeutics, AbbVie appears well-positioned for further earnings growth. Forecasts call for revenue and earnings growth of around 10% and 40%, respectively, during 2026.

As earnings growth continues, AbbVie remains well-positioned to continue its dividend growth streak. Currently, the stock has a forward dividend yield of around 2.75%, with annual dividend growth averaging nearly 6% over the past five years.

Chevron remains a Dividend King in the making

Integrated oil and gas company Chevron has nearly 40 years of consecutive dividend growth. That means it's just a little over a decade away from attaining Dividend King status. Dividend Kings are stocks with 50 or more years of consecutive dividend growth.

With a forward dividend yield of around 3.75%, Chevron has also raised its dividend by an average of 6% over the past five years. An additional wave of mid-single-digit dividend growth may be in the cards. Even as crude oil prices have eased since the geopolitically driven supply shocks earlier this year, they remain within a range that supports the energy company's long-term cash flow growth goals.

As announced last November, Chevron's game plan to "maintain capital and cost discipline" could lead to 10% annualized earnings growth between now and 2030 if Brent crude oil prices stay above $70 per barrel. Alongside cost-cutting measures, Chevron's game plan also entails leaning into growth opportunities, such as providing power solutions for artificial intelligence (AI) data centers.

PepsiCo: A contrarian buy among dividend stocks

PepsiCo shares have fallen out of favor in recent months. The packaged food and beverage company continues to struggle with declining U.S. market share, even as quarterly results beat forecasts.

Yet while the market remained bearish, much suggests ample rewards for those going contrarian at present price levels. Right now, the stock has a forward dividend yield of around 4.4%. PepsiCo is already a Dividend King, with a 54-year track record of annual dividend increases, and the company's dividend growth has averaged around 6% annually over the past five years.

As Morgan Stanley's Dara Mohsenian recently noted, factors like tariff refunds and continued strong international results could help offset recent concerns. Since PepsiCo's shares are trading for only 18 times forward earnings, while competitor Coca-Cola trades for 25 times forward earnings, there's ample upside potential if sentiment improves.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Chevron. The Motley Fool has a disclosure policy.

Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) is not as technology-shy as it once was. Over the past few decades, the holding company, led by Warren Buffett until his retirement in 2025, has increased its exposure to tech stocks.

Currently, this includes not just its large position in Apple (NASDAQ: AAPL), but also a burgeoning position in Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), parent company of Google and YouTube. Many would also classify both of these "Magnificent Seven" stocks as artificial intelligence plays.

However, some will debate whether these represent "pure-play" AI stocks in the same sense that names like Nvidia or Palantir do. But Berkshire Hathaway has AI exposure in other ways, namely, through one of its wholly owned operating subsidiaries.

Berkshire bought this company many years ago and, for a while, considered it an unsuccessful acquisition. Yet thanks to the data center proliferation, Berkshire Hathaway's 2016 purchase of Precision Castparts for $37.2 billion is starting to look like a winning move.

Image source: The Motley Fool.

From one specialty market to another

Based in Portland, Oregon, Precision Castparts makes specialty metal components for the aerospace and industrial sectors. This aerospace exposure may have been why Buffett and Berkshire saw the company as a buy in 2016, but during the height of the COVID-19 pandemic in 2021, even Berkshire Hathaway admitted that it was an ill-fated deal.

That year, Buffett's holding company wrote down nearly $10 billion in goodwill related to the Precision Castparts purchase, citing the subsidiary's diminished value due to the pandemic's impact on air travel and, hence, demand for aerospace.

Now, however, the situation has improved dramatically. Beyond a rebound in aerospace demand, chalk up Precision Castparts' improved performance to another factor: the AI data center boom. As hyperscalers turn to gas-powered turbines to power data centers, and as these turbines use similar components to those in jet engine turbines, Precision Castparts, one of just a few companies in this niche industry, is cashing in big-time.

After generating just $900 million in annual operating cash flow during the pandemic-era slowdown of 2021, last year, Precision reported $2.4 billion in operating cash flow. For reference, the company's annual operating cash flow was around $1.7 billion just prior to its acquisition by Berkshire.

The takeaway for Berkshire and its AI exposure

Make no mistake: Precision's indirect AI exposure by no means turns Berkshire Hathaway into a "pure-play" AI stock. The trillion-dollar conglomerate's interests in sectors like insurance dwarf its exposure to the technology sector, let alone to the AI megatrend.

Still, this opportunity didn't emerge from Berkshire chasing trends. Berkshire bought Precision Castparts, sensing that the company had a deep economic moat. Recent developments validate this thesis. Precision's edge in turbine components opened the door to the data center opportunity.

This takeaway can be applied to Berkshire. By purchasing high-quality assets and investments at fair prices and holding them for the long term, Berkshire is well positioned to benefit from emerging economic trends.

Only time will tell whether Greg Abel, Warren Buffett's successor, increases Berkshire's AI exposure. Yet if it continues to prioritize long-term quality over trends, similar situations to those at Precision Castparts could emerge.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.

Artificial intelligence (AI) data centers are popping up everywhere, to the point where it's becoming a source of political backlash. Yet while the debate over where to build data centers rages on, one thing remains very certain.

As AI data centers proliferate, electricity demand will continue to rise as well. While this trend could bode well for utility stocks across the board, it could serve as a strong long-term catalyst for the following three electric utility stocks in particular: Constellation Energy Group (NASDAQ: CEG), Entergy (NYSE: ETR), and NextEra Energy (NYSE: NEE).

Image source: Getty Images.

Constellation Energy: Melting up on AI growth

Spun off from utilities giant Exelon in 2022, Constellation Energy Group provides electricity and natural gas to a variety of customers, including regulated utility companies. What makes Constellation especially interesting is its high exposure to nuclear power.

That is, the company owns and operates 15 nuclear power plants, primarily in the Midwest and Mid-Atlantic. In the past, nuclear power has been a controversial industry, but in recent years, public and private stakeholders have recognized nuclear power's value as a scalable, low-carbon energy source, with nuclear power plants a viable "green" alternative to coal- and natural gas-fired power plants.

When it comes to the AI data center trend, Constellation benefits in two ways. First, greater demand from hyperscalers translates into greater demand from Constellation's regulated utility customers. Second, as these same hyperscalers begin entering into direct power deals with independent power generation companies, Constellation has secured long-term deals with companies like Meta Platforms.

Thanks to its AI-related catalyst, analysts anticipate Constellation's earnings to grow by nearly 25% this year, and by nearly 16% in 2027. This double-digit earnings growth could help sustain Constellation's low-20s forward earnings multiple, with shares continuing to rise in line with earnings growth. Alongside appreciation potential, don't discount Constellation's strengths as a dividend stock.

With a forward yield of around 0.7%, Constellation certainly isn't one of the high-yield dividend stocks, but its quarterly payouts have increased by over threefold since the company went public in 2022.

Entergy is well positioned to benefit from the boom

Entergy, the electric utility for much of the Gulf region, has relatively large exposure to the AI data center boom. That's because it is the utility set to supply power to Meta's $50 billion data center currently under construction in northeast Louisiana.

The utility also stands to benefit from other large-scale data center projects in the region, including Amazon's numerous data center projects in Mississippi. While Meta and Amazon are both agreeing to fund the energy infrastructure required for these projects, Entergy needs to raise billions in capital to expand its power generation capacity.

A portion of this capital is coming from dilutive share sales. Earlier this year, Entergy disclosed plans to raise up to $4.4 billion in equity through 2029, of which it raised $2.2 billion during a secondary offering completed in May. However, compared to Entergy's $53 billion market cap, this represents relatively modest share dilution.

Moreover, while this catalyst may be capital-intensive, the payoff for Entergy could be massive. Long-term forecasts call for earnings to rise by nearly 40% between now and 2029. Entergy also has a 2.2% forward dividend yield and has raised payouts at a steady annualized 5.5% clip for the past five years.

With its upcoming merger, NextEra is doubling down on the trend

After surging and sinking amid the "clean energy" trend in the early 2020s, NextEra Energy has since bounced back, driven by the AI data center trend. Besides being the parent company of Florida Power & Light, NextEra also owns renewable power generation assets located across the United States.

That's not all. With its recently announced plan to merge with Dominion Energy, NextEra is materially increasing its exposure to the trend. Dominion Energy is the local utility company for northern Virginia, commonly dubbed "data center alley" for its high concentration of data centers.

As Jefferies analyst Julien Dumoulin-Smith noted at the time of the announcement, NextEra's expertise, coupled with Dominion's assets, could lead to growth synergies. The company's management has already anticipated that the deal could produce annual adjusted earnings growth of at least 9% through 2032.

With the shares trading at a forward earnings multiple in the low 20s, a rerating could prove difficult, but long-term steady earnings growth could pave the way for solid gains in the years ahead. This upcoming deal could be a boon for dividend growth as well.

NextEra has over three decades of consecutive annual dividend growth under its belt. With the stock currently sporting a 2.8% forward dividend, long-term success with the Dominion merger could be what gets the stock to Dividend King status. Dividend Kings are stocks with over 50 years of consecutive earnings growth.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Constellation Energy, Entergy, Jefferies Financial Group, Meta Platforms, and NextEra Energy. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.

Make no mistake: ExxonMobil (NYSE: XOM) remains the epitome of "big oil." The energy giant is one of the world's largest integrated oil and gas companies, with exploration projects, refineries, and retail energy operations worldwide.

However, while the "green wave" investing trend has lost momentum in recent years, don't assume ExxonMobil has completely abandoned its efforts to capitalize on it. Alongside efforts to maximize the profitability of its legacy business through measures like cost-cutting and a focus on high-return exploration opportunities, ExxonMobil has continued to commit billions to its "clean energy" projects.

Although these projects don't contribute much to the bottom line yet, in a little over a decade, they could become a secondary source of profitability for this blue chip dividend stock.

Image source: Getty Images.

ExxonMobil's lean, mean, hydrocarbon cash machine

ExxonMobil has prioritized maximizing profitability in its legacy business. Why? For starters, the company wants to maintain its dividend growth track record. With 43 years of consecutive annual dividend growth under its belt, it's less than a decade away from becoming one of the Dividend Kings, or companies with over 50 years of consecutive dividend growth.

Alongside growing the dividend, which currently gives the stock a 2.9% forward yield, ExxonMobil also remains committed to another type of "return of capital" activity: share repurchases. Management is currently targeting $20 billion in annual buybacks. That's around 3.3% of the company's current market capitalization.

As share repurchases help increase a stock's underlying per-share value over time, ExxonMobil is, in essence, trying to maintain a mid-single-digit return baseline. Besides the return of capital, the company is trying to, as CEO Darren Woods recently put it, "produce more oil for less money," with another objective in mind. That would be to produce greater cash flow, not only to support dividend and buyback growth, but to fund ExxonMobil's "green pivot" as well.

The longer-term payoff

ExxonMobil's near-term objective for its efficiency efforts is to increase annual earnings and cash flow by $25 billion and $35 billion, respectively, compared with 2024 levels. Management anticipates hitting this goal by 2030. The company is ramping up profitability to sustain earnings and dividend growth and spur further price appreciation.

Over a longer time horizon, however, the company is also putting a lot of this cash into its "green wave projects." As part of its "2030 Plan," unveiled last December, ExxonMobil also announced plans to invest $20 billion in what it calls its "lower-emission investments" between 2025 and 2030, with 60% of this investment focused on reducing emissions for third-party customers. This includes not only investment in ExxonMobil's carbon capture and storage (CCS) projects, but also in its Proxxima resin systems project, and in its budding low-emissions hydrogen and domestically sourced lithium.

Make no mistake. ExxonMobil isn't trying to "green" up its image by investing heavily in the business. Alongside sustainability, the oil and gas giant also sees financial opportunity. As the company's management believes these businesses could generate up to $13 billion in additional earnings by 2040, consider ExxonMobil's "green wave" wager as a secondary catalyst for the stock in the long term.

In short, buy this energy stock for the 2.9% dividend and 2030 transformation today -- and hold it for the next big transformation down the road.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.