The Smartest Dividend Stocks to Buy for $1,000 Right Now
Key Points
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High interest rates have weighed on one of the world’s best REITs.
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Renewable energy demand will continue to drive growth for this proven industry leader.
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One of Warren Buffett’s newest investments remains a compelling buy.
Dividend investing is a long-term game, and it can be highly lucrative. For dividend stocks, every share counts because they gradually increase your annual income until, eventually, it’s enough to cover your living expenses without needing to sell any shares.
It’s not the only way to invest, but it’s an excellent blueprint for achieving and sustaining financial freedom. There are countless dividend stocks you can choose from, but the best picks will be growing companies with healthy financials and a track record of successfully increasing their payout over time.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
Here are three blue chip dividend stocks to consider. I believe their strong business qualities and compelling valuations make them some of the smartest dividend stocks to buy for $1,000 today.
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1. Realty Income
Owning property is one of the most time-tested ways to generate passive income. Realty Income (NYSE: O) is a leading real estate investment trust (REIT), a company that acquires and leases properties for investment purposes. REITs are typically great dividend stocks because they are required to distribute at least 90% of their taxable income as nonqualified dividends.
The company operates a diverse portfolio of more than 15,000 properties across the United States and parts of Europe, specializing in retail properties and consumer-facing businesses, such as convenience stores, restaurants, and gyms. Its dividend track record is impeccable. It pays monthly (most companies pay quarterly), and management raised the dividend for decades without interruption. The dividend yield is 5.6%, so investors receive a solid payout from the jump.
Realty Income and other REITs borrow to fund new acquisitions, so higher interest rates are a headwind that weighs on the stock. Shares currently trade at about 13 times its guided 2025 funds from operations, a bargain price for a business that has historically grown at a mid-single-digit pace over the long term.
2. NextEra Energy
It’s becoming apparent that as artificial intelligence (AI) advances, the world will require significantly more energy over the coming decades. NextEra Energy (NYSE: NEE) will benefit as one of the largest electric utilities in the U.S. and a leading producer of renewable energy. A steady utility business and rising demand for renewables fueled 30 years of uninterrupted dividend growth and impressive total returns.
The utility has a backlog of approximately 27.7 gigawatts and plans to invest $120 billion in energy infrastructure over the next four years to satisfy increased power demands. This should support the company’s long-term growth projections for 6% to 8% annualized earnings growth through 2027. However, it seems that growth can extend well beyond that, with energy demand estimates continually rising.
The stock’s price-to-earnings ratio, currently 20, is a fair valuation for a steadily growing company that pays a rising dividend with a yield of 3.1%. Shareholders can reasonably expect total annualized returns of around 10% to 11%, and that’s before reinvesting dividends. Anytime a long-term investor can buy a proven winner with a path to double-digit returns, it’s a wise decision.
3. Pool Corporation
The past few years have been challenging for Pool Corporation (NASDAQ: POOL), the world’s largest distributor of swimming pools, equipment, and supplies. Consumers felt the squeeze of higher interest rates and living expenses. A new in-ground pool can cost tens of thousands of dollars, so it’s clear why demand could slow if consumers are struggling financially.
The company built up a huge customer base. Buying a new pool is akin to an initiation fee, a one-time up-front cost. But once you have a pool, you must continually treat, maintain, and repair it.
These recurring sales comprise the bulk of Pool Corporation’s business model. It helped the company pay and raise its dividend for 14 consecutive years. Slumping sales of new pools are currently weighing on growth, and the stock yields 1.6% today, its highest in over 20 years.
However, the dividend payout ratio is still less than half of its 2025 earnings estimates, so the dividend still has plenty of financial breathing room. Over time, the growth will likely bounce back as consumer spending and sales of new pools rebound.
It’s often wise to buy these cyclical stocks during periods of slow growth. Warren Buffett’s Berkshire Hathaway saw value in its shares; the company opened a stake in Pool Corporation late last year at a price higher than the stock currently trades at.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, NextEra Energy, and Realty Income. The Motley Fool has a disclosure policy.