A little money can go a long way. This is especially true when you invest in stocks that pay you to hold the shares.
Of course, I'm talking about dividend stocks. There are plenty of quality stocks that offer attractive dividends without a high cost. Here are my picks for the smartest dividend stocks to buy with $100 right now.
you can share Ares Capital (NASDAQ:ARCC) At current prices, that's about $23. I think doing this is probably one of the best investments you can make, especially if you're looking for income.
Ares Capital's forward dividend yield is 8.4%. Why is the yield so high? Ares Capital is a Business Development Company (BDC). To be exempt from federal income taxes, a BDC must return at least 90% of its income to shareholders as dividends. This has resulted in substantial gains for its shareholders.
A key reason is the nature of the company's business. Demand for direct loans provided by business development companies is rising due to a variety of factors, including the speed with which deals can be completed and reliable access to capital during volatile times. For the traditional middle market of U.S. companies with annual revenues between $100 million and $1 billion, the total addressable market for direct lending is approximately $3 trillion. If you include companies with more than $1 billion in annual revenue, that number jumps to $5.4 trillion.
Furthermore, Ares Capital is significantly ahead of its peers. It is the largest publicly traded BDC and has deep relationships in the market. The company's dividend per share growth and total returns have also been higher than those of its major competitors over the past 10 years.
Another $34 or so will get you a copy Enterprise product partners (NYSE:EPD). Technically, you'll receive a unit rather than a share of the midstream energy leader because it's a limited partnership (LP). Investing in limited partners comes with some tax headaches, but I think enterprise product partners are worth the extra effort.
Enterprise's forward distribution yield recently exceeded 6.35%. Want better news? LP has increased circulation for 26 consecutive years.
I like that Enterprise Product Partners' businesses hold up well during recessions and turbulent times. Inflation has little impact on it because about 90% of long-term contracts have price escalation clauses. Corporate cash flow also doesn't fluctuate with oil and gas prices; it charges the same fees for use of its pipelines regardless of commodity prices.
These aren't the only reasons why Enterprise is a smart investment right now. Its valuation is attractive, with a forward price-to-earnings ratio of 11.6 times. I also think the second Trump administration will implement preferential policies for midstream companies like Enterprise.
After investing in Ares Capital and Enterprise Products Partners, you should have about $43 left over from your initial $100. That's enough to buy one share Pfizer (NYSE: PFE)currently trading below $27 per share.
Pfizer's current forward dividend yield of 6.5% is near its highest level in 15 years. The drugmaker's dividend also appears to be safe: Management has consistently made maintaining and growing the dividend a top priority for the company's capital allocation.
Granted, some may be wondering whether buying Pfizer right now is a smart idea. Several of the company's drugs will lose patent protection in the next few years. Pfizer also estimates that the Inflation Reduction Act will have a negative impact of about $1 billion on its revenue this year.
However, I am bullish on Pfizer's prospects in the second half of this century. It has multiple new products to drive growth and a promising late-stage pipeline. The stock is also very cheap as the stock trades at less than 9 times forward earnings.
Before buying shares of Ares Capital, consider the following factors:
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Keith Speights holds positions at Ares Capital, Enterprise Products Partners and Pfizer. The Motley Fool owns and recommends Pfizer. The Motley Fool recommends enterprise product partners. The Motley Fool has a disclosure policy.
The Smartest Dividend Stocks to Buy Now with $100 Originally Posted by The Motley Fool