5 Top Stocks to Buy in May

A lot has changed since we recommended our top five stocks to buy in April.

Volatility has spiked. Market sentiment tanked but has since improved, with an epic rally in the major indexes, as investors look toward trade resolutions rather than envisioning the worst-case scenario.

Through it all, investors are tasked with filtering through the noise and making decisions grounded in reason rather than emotion.

Here's why these Motley Fool contributors see Walmart (NYSE: WMT), Micron Technology (NASDAQ: MU), Starbucks (NASDAQ: SBUX), NextEra Energy (NYSE: NEE), and Enbridge (NYSE: ENB) as five top stocks to buy in May.

Image source: Getty Images.

Go shopping for a higher dividend

Demitri Kalogeropoulos (Walmart): This retailer's stock has trounced the market over the past year, but there's still room to run for Walmart shareholders. Sure, the company's 5% revenue increase (after accounting for currency fluctuations) might seem underwhelming at a glance. Look closer, though, and you'll see some good reasons for Wall Street's optimism about this massive global business. Walmart attracted more visitors to its stores in fiscal Q4, with traffic rising 3%, on top of the previous year's 4% boost. But its non-core business lines are performing even better. E-commerce sales were up 16%, and digital advertising jumped 24%. "We are more tech-powered than we've ever been," CEO Doug McMillon said in the company's recent annual report. These tech investments include artificial intelligence (AI) to boost efficiency in distribution and fulfillment centers and improve inventory flow. Walmart's delivery network is on track to reach 95% of the U.S. population in under three hours by the end of 2025, management estimates.

The company is having no trouble remaining profitable as it invests in these customer-experience-enhancing projects. Operating profit was up a healthy 8% last year, doubling the sales growth rate. This success gave management the confidence to hike Walmart's annual dividend by 13% for 2025, the biggest increase in over a decade.

That income should help buffer shareholder returns through the type of volatility that has struck the market so far this year. Walmart's focus on consumer staples products also makes it a defensive stock to own during recessionary downturns. Either way, consider putting this blue chip business in your portfolio to gain exposure to growth, dividend income, and rising profitability over the years to come.

The unsung hero of AI hardware

Anders Bylund (Micron Technology): I love nuts-and-bolts investments that let you make money from an exciting growth market without picking winners in headline-inspiring battles. Micron Technology is a great example of that strategy. The target market is AI, of course.

Micron isn't the only company that makes high-bandwidth memory suitable for AI systems. Chief rivals SK Hynix and Samsung Electronics (OTC: SSNL.F) are also making memory chips in this category.

But Micron has a unique ace up its sleeve. It's the only provider of low-power memory chips for data center systems. Reduced power consumption can be a serious selling point, especially for very large computers with many terabytes of memory. The system chassis and AI accelerator chips are just the start of a costly processing journey. The bills for power and cooling set the true cost of ownership in the long run.

So, Micron holds a position of strength in this lucrative niche of the AI hardware business. And every AI accelerator from Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), or Intel (NASDAQ: INTC) comes packed with lots of these high-speed (but power-sipping) memory chips.

Long story short, Micron is poised for many years of AI-powering success.

"Micron is in the best competitive position in our history," CEO Sanjay Mehrotra said in March's second-quarter earnings call. "Micron's industry-leading products are now more firmly entrenched in our customers' high-value product roadmaps."

Don't forget that the stock is trading more than 50% below last year's all-time highs, and Micron's valuation is a modest 7 times forward earnings estimates. So, if you don't already have a Micron position in your portfolio, this could be a great time to get started.

The sell-off in Starbucks stock has gone too far

Daniel Foelber (Starbucks): Starbucks badly missed second quarter fiscal 2025 earnings estimates, with consolidated revenue up just 2%, non-GAAP (adjusted) earnings per share down 40%, and non-GAAP operating margins down to just 8.2%. Starbucks stock is at its lowest level since August when it was announced that Brian Niccol would take over as CEO.

Starbucks' poor results indicate that its turnaround could take more time as the company faces a slew of headwinds, from challenged consumer spending to ongoing concerns in China -- its second-largest market outside the U.S.

However, management reiterated optimism in its long-term strategy, which centers around investing in its employees, improving the customer experience, making Starbucks less transactional and more community-driven, and restoring the brand's value on the international stage.

Despite management's upbeat tone, there's no sugarcoating how bad Starbucks's results were. China comparable sales (comps) were flat, thanks to a 4% increase in transaction volume but a 4% decline in the average ticket. Normally, those results wouldn't be cause for celebration. But China had seen far worse results in recent quarters. Rather, the bigger concern was North America, where comps declined by 1%, with a 4% decline in comparable transactions and a 3% increase in average ticket.

The results are particularly jarring, considering that Starbucks has made numerous efforts to increase foot traffic and spark customer engagement, such as eliminating non-dairy upcharges, simplifying its menu, and other efforts to improve the customer and employee experience.

Given all the negatives, investors may be wondering why Starbucks is even worth considering in May. The investment thesis involves looking past near-term results and focusing instead on the long-term outcome of a potential turnaround. If Starbucks can return to growth in international markets and produce steady results in North America, it could be an excellent time to buy the stock during this period of uncertainty.

In the meantime, Starbucks has an attractive valuation and a dividend yield of 3%, which is sizable for a company historically valued for its growth, not passive income. Starbucks has become a viable income stock, with 14 consecutive years of dividend raises.

Add it all up, and Starbucks is worth a closer look for patient investors in May.

A bankable dividend growth stock for turbulent times

Neha Chamaria (NextEra Energy): There's tariff-driven uncertainty around the economy, and the stock markets are as volatile as ever. Adding a defensive stock to your portfolio amid the chaos could be one of the smartest moves, especially for a company like NextEra Energy, which has just reiterated its outlook for 2025 and beyond despite the uncertainty.

NextEra Energy owns and operates Florida Power & Light (FPL), the largest utility in the U.S., with over six million customers. Utilities are, by nature, recession-resistant businesses since demand for electricity, gas, and water remains steady regardless of how the economy fares. While that takes care of the stability in its cash flows, growth largely comes from renewable energy. NextEra Energy is also the world's leading producer of energy from wind and solar and a leader in battery storage.

NextEra Energy just reported a 9% growth in its adjusted earnings per share (EPS) for the first quarter. The company expects to spend $8 billion to $8.8 billion on FPL this year. Its renewables business, meanwhile, added roughly 3.2 gigawatts (GW) of capacity to its backlog in Q1, driving its total backlog up to nearly 28 GW. By the end of 2027, NextEra Energy expects to have a renewables generation and storage capacity of 70 GW.

As one may guess, there's a lot of growth embedded in that pipeline. NextEra Energy is confident of growing its adjusted EPS by 6% to 8% through 2027 and its dividend per share by around 10%, at least through next year. That dividend growth, coupled with its yield of 3.4%, makes NextEra Energy stock a buy.

This energy leader is defying the market sell-off

Keith Speights (Enbridge): Investors who have been around the block a time or two know the wisdom of the adage, "There's always a bull market somewhere." This statement is true today amid the stock market chaos. Just look at Enbridge. Shares of the Calgary-based energy leader have jumped close to 10% while the major market indexes have tumbled. Enbridge's solid year-to-date performance builds on the tremendous momentum from 2024, when the stock soared nearly 18%.

What is Enbridge's secret to success? For one thing, investors appreciate the stability of the company's business. Enbridge has met or exceeded its financial guidance for 19 consecutive years. Its pipeline business has delivered predictable cash flows no matter what was going on in the oil and gas industry.

I think Enbridge's business is even more resilient now. The company is the largest natural gas utility in North America, thanks to three key acquisitions. It has also expanded into renewable energy, with wind and solar farms in the U.S. and Canada.

Enbridge expects to increase its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 7% to 9% through 2026. Its potential growth drivers include toll escalators and higher utilization of its liquids pipelines business, contributions from its Whistler joint venture and Delaware Basin Residue projects, and the addition of its acquired U.S. natural gas utilities.

Investors should also enjoy higher total returns with Enbridge's juicy dividends. The company's forward dividend yield currently tops 5.8%. Enbridge has increased its dividend for an impressive 30 consecutive years.

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Anders Bylund has positions in Intel, Micron Technology, Nvidia, and Walmart. Daniel Foelber has positions in Nvidia. Demitri Kalogeropoulos has positions in Starbucks. Keith Speights has positions in Enbridge. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Enbridge, Intel, NextEra Energy, Nvidia, Starbucks, and Walmart. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.