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The Smartest Dividend Stocks You Can Buy Right Now With $400

Wondering if investing in dividend stocks is a smart move? I point you to Warren Buffett. Buffetts Berkshire Hathaway portfolio is filled with dividend stocks. And he is one of the smartest investors of all time.

You don’t have to be a billionaire to buy great dividend stocks. With a relatively small amount upfront, you can pick up several stocks with exceptional dividends. Here are my picks for the smartest dividend stocks you can buy for $400 right now (listed alphabetically).

1. Ares Capital

You may not be familiar with it Ares Capital (NASDAQ: ARCC). However, mid-market companies in the US are. Ares Capital is the largest publicly traded business development company (BDC) providing capital to the middle market.

The stock is cheap in two ways. First, Ares Capital’s share price is below $21. Second, the stock trades at a price-to-earnings ratio of around 8.6 – a low valuation multiple for any sector.

What I especially like about Ares Capital is its ultra-high dividend yield of almost 9.4%. The BDC appears to be in a solid position to pay dividends at least at current levels. It has an excellent track record in this area. Ares Capital has paid out a stable or growing quarterly dividend for 14 years in a row.

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Thanks in large part to its strong dividend, Ares Capital’s average total return has outperformed equity markets S&P500 since its initial public offering (IPO) in 2004. The market for private capital continues to grow. Ares Capital’s reputation and expertise should make it possible to remain at the top of this market. I expect the stock to deliver excellent total returns in the coming years.

2. Business product partners

Partners for business products (NYSE:EPD) is a leader in the US midstream energy sector. The limited partnership (LP) operates more than 50,000 miles of pipelines that transport crude oil, natural gas and natural gas liquids (NGLs) across the country.

You don’t have to use the entire $400 upfront to purchase multiple units of Enterprise Products Partners where the unit price is less than $30. The midstream energy sector leader also offers an attractive valuation with an earnings multiple of a hair under 11.

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One setback for Enterprise Products Partners is the tax issues associated with investing in LPs. However, I think the company’s juicy distribution yield of over 7% justifies the extra tax preparation efforts. I also love that Enterprise has expanded its distribution for 25 years in a row.

Is Enterprise Products Partners a smart choice for the long term as climate change concerns drive a shift to renewable energy sources? I think so. Demand for oil and gas is likely to grow even as renewable energy adoption increases.

3. Pfizer

Pfizer (NYSE:PFE) probably needs no introduction to many investors. The company is one of the largest drug manufacturers in the world. The range includes several blockbuster drugs and vaccines.

This major pharmaceutical stock is easily affordable, with shares trading around $27. Pfizer’s sharp decline since late 2021 has made its valuation more attractive. The drugmaker’s profit margin now stands at just over 12.1.

Pfizer’s dismal stock performance has also had another positive side effect for investors. The company’s dividend yield is almost the highest in more than a decade, at over 6.2%.

I believe Pfizer can achieve stronger growth in the coming years than current challenges reflect. The company expects the launch of new products and new indications for existing products to add approximately $20 billion in annual revenue by 2030. It expects business development deals to contribute an additional $25 billion in annual revenue by 2030.

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Should you invest €1,000 in Pfizer now?

Consider the following before buying shares in Pfizer:

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Keith Speights has positions in Ares Capital, Berkshire Hathaway, Enterprise Products Partners and Pfizer. The Motley Fool holds and recommends positions in Berkshire Hathaway and Pfizer. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.

The Smartest Dividend Stocks to Buy Right Now with $400 was originally published by The Motley Fool

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