3 Red-Hot Dividend Stocks to Buy in May That Are Up Between 9% and 27% in 1 Month

The broader stock market indexes have been on a tear in recent weeks, fueled by a rally in megacap growth stocks. But plenty of dividend stocks have also joined the party, like Deere (NYSE: DE), Energy Transfer (NYSE: ET), and Huntington Ingalls Industries (NYSE: HII).

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All three stocks are up big in the last month. Here's why they are still worth buying in May.

Deere stock can leap to new heights if economic conditions keep improving

Daniel Foelber (Deere): Heavy machinery giant Deere has stood out in the beaten-down industrial sector. The shares are up more than 16% year to date at the time of this writing. The recent surge is likely due to investor optimism about easing trade tensions. But Deere isn't out of the woods just yet.

A prolonged period of tariffs could hurt demand for Deere's products, raise Deere's costs, and throw a wrench in global trade. An economic slowdown would leave Deere's customers with less cash. When the economy is expanding and interest rates are low, Deere's customers are more likely to boost their capital expenditures on long-term investments -- like expensive machinery. So Deere is a great buy for investors hoping the U.S. avoids a recession.

Still, Deere has a lot to prove when it reports earnings on May 15. When Deere reported first-quarter fiscal 2025 results in February (ended Jan. 26), trade tensions had yet to heat up. The company booked just $869 million in first-quarter net income but forecast full-year net income of $5 billion to $5.5 billion. Compared to first quarter 2024, revenue fell 30% and net income was down 50%. If that trend continues, Deere will miss its full fiscal year projection.

On its February earnings call, Deere said it expects pricing pressures in the second quarter, but that those pressures could ease in the second half of 2025 for certain segments. Deere also faces easier comps against the second half of fiscal 2024 -- which was weak. So the year-over-year comparisons likely won't be as drastic in the second half of this year, even if the results are poor.

It's also worth understanding that Deere has been experiencing a multiyear slowdown after sales and earnings soared after the pandemic. Its stock price has continued to climb even while sales and earnings have tumbled, which has pushed up Deere's valuation.

DE data by YCharts

Deere has numerous advantages over other heavy machinery companies. On its February earnings call, it outlined why its supply chain is fairly protected against tariffs thanks to its domestic manufacturing and lack of exposure to China.

On the next earnings call, investors should listen to see if Deere is adjusting its supply chain to be even more tariff-resistant, if it is seeing weakness in its end markets or more cautious buyer behavior amid economic uncertainty, and if it reaffirms its full-year outlook.

Deere could be worth a closer look for investors interested in an industry-leading company that is less global than some of its peers and who care more about growth than passive income. Deere has a modest 1.3% yield, but historically focuses more of its capital return program on stock buybacks and preserving capital to make long-term investments -- like expanding its artificial intelligence and autonomous tractor offerings.

Energy Transfer's distribution yield is approaching 8%

Lee Samaha (Energy Transfer): It's no secret that the current administration is business-friendly and wants to encourage the U.S. to develop energy assets to support domestic use and also for export to reduce the U.S. trade deficit. While reshoring toy factories from China or garment manufacturing from Bangladesh to the U.S. might prove a tall order, developing natural gas and exporting liquified natural gas (LNG) is not.

That's where the pipeline and energy infrastructure company Energy Transfer comes in.

The master limited partnership (MLP) has a distribution yield of 7.5%, but investors shouldn't assume it's a low-growth cash cow type of stock. In fact, Energy Transfer has plans to make $5 billion in growth capital expenditures in 2025. It is a large figure, especially when considering its maintenance capital expenditures, which are budgeted at only $1.1 billion for 2025.

In addition, management recently signed a heads of agreement deal with a subsidiary of an institutional investor, EIG Global Energy Partners, to potentially develop a large LNG export facility project in Lake Charles, Louisiana. Both parties are set to make a final investment decision on the project in due course.

If you are confident that the Trump administration will usher in a change in U.S. energy production and LNG exports, then Energy Transfer is set to be a winner.

Huntington Ingalls sees a return to strong free cash flow in 2025

Scott Levine (Huntington Ingalls): It's been rough for the market so far in 2025, but defense stalwart Huntington Ingalls has mostly enjoyed smooth sailing. While the S&P 500 (SNPINDEX: ^GSPC) has dipped nearly 4%, shares of America's largest military shipbuilder have risen more than 20%. Hopping aboard with an investment in Huntington Ingalls and collecting its 2.3% forward-yielding dividend certainly seems worth strong consideration right now.

Although first-quarter 2025 revenue of $2.7 billion fell short of analysts' expectations of $2.9 billion, unexpectedly strong earnings overshadowed potential investor disappointment in the company's sales. Whereas analysts estimated Huntington Ingalls would report $2.81 in diluted earnings per share, the company reported EPS of $3.79.

But it's not only the look back that inspired investors. Management reaffirmed a 2025 forecast that included shipbuilding revenue of $8.9 billion to $9.1 billion and free cash flow of $300 million to $500 million. For context, Huntington Ingalls reported shipbuilding revenue and free cash flow of $8.7 billion and $40 million, respectively, in 2024.

During the past decade, Huntington Ingalls has shown a steady commitment to rewarding shareholders, hiking its payout higher in each consecutive year -- and the raises haven't been nominal. From 2015 through 2024, Huntington Ingalls raised its dividend at a 13.3% compound annual growth rate.

Lest investors surmise that the company has risked its financial health to please dividend-hungry investors, it's important to recognize that it consistently generates ample free cash flow to cover its dividend payments.

HII Dividend Per Share (Annual) data by YCharts.

Becoming a premier supplier of submarines, amphibious ships, and aircraft carriers is no simple task. As such, Huntington Ingalls retains a significant competitive advantage as the barrier to entry is high for would-be competitors. For conservative investors looking to ramp up their passive income, Huntington Ingalls is a leading defense stock that warrants serious attention.

Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deere & Company. The Motley Fool has a disclosure policy.