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Got $5,000? 3 Top Dividend Stocks to Buy Right Now

Got $5,000? 3 Top Dividend Stocks to Buy Right Now
Written by publishing team

Predictability and the stock market are two things that rarely go hand in hand. Although there are no risk-free stock options, companies with stable operations and a history of increasing profits can provide a dose of predictability to investors.

specially, Standard & Poor’s 500 Dividend stocks have outperformed the index, posting annual returns of 10% versus 8% for the index as a whole since 1973. And by good health, I mean two things: a dividend that is comfortably funded from the company’s net income and a history of rising that return annually.

Today, we’ll look at three S&P 500 stocks that fit right in with this healthy dividend profile and look like they’ll continue to outperform their peers in the broader index.

Image source: Getty Images.

Maximum profit distribution potential

Measure Nasdaq Visa Domino’s Pizza
profit return 1% 0.7% 0.7%
Pay Percentage 30% 23% 27%
Maximum profit distribution potential 3.4% 3.2% 2.7%

Data source: Yahoo! finance.

By dividing the dividend yield by the dividend yield ratio, the maximum dividend potential shows what the company would achieve if it paid out all the income available to shareholders. This quick calculation is useful for companies like the three we’re going to look at today, as it helps highlight the potential for their small and growing dividend yield – all at current stock prices.

Nasdaq: 3.4% max dividend

Led by emerging Software as a Service (SaaS) operations, diversified financial exchange Nasdaq (NASDAQ: NDAQ) Its annual recurring revenue (ARR) grew 19% for the third quarter year over year. With company-wide SaaS sales growing 42% annually for the third quarter, these flat sales grew to 34% of Nasdaq’s total ARR.

Driving this SaaS growth is the company’s promising Financial Crime Prevention unit, which grew 16% annually for the third quarter and 106% year-over-year if its recent acquisition of Verafin is included. This acquisition focuses on the market technology, fraud and anti-money laundering segment, which has an estimated serviceable market of $9.5 billion.

Compared to Nasdaq’s subsequent 12-month revenue of $437 million for this segment, this market opportunity is 20 times larger than its current operations.

NDAQ Profit Margin Chart.

Image source: pg charts.

NDAQ Profit Margin Data by YCharts

Thanks to the company’s ongoing SaaS transformation, Nasdaq has seen its profit margin nearly double in just the past three years, highlighting the higher margins generally associated with SaaS sales. While the company will not truly be a full-fledged SaaS company due to its transaction-based business operations, management is aiming for SaaS sales to reach 40% to 50% of total ARR by 2025.

With nine years of consecutive dividend increases, an improving profit margin, and a solid growth trajectory in the fight against financial crime, it appears Nasdaq is poised to become a timely dividend aristocrat, all while offering promising earnings growth to investors.

Visa: 3.2% maximum of potential earnings

With the rise of fintechs and Buy Now, Pay Later (BNPL) companies across the financial landscape, market sentiment towards Visa (NYSE: V) And its gigantic network has deteriorated somewhat. With shares down more than 15% since July, investors are nervous about whether this is a buying opportunity or a sign that the company is losing relevance in today’s finance industry.

However, despite the threat that the rise of the BNPL may pose, Visa could already be prepared to take advantage of this trend. Speaking about the idea during the company’s fourth-quarter earnings call, CEO Alfred Kelly explained: β€œThe majority of installment payments are made on cards today. For example, in Canada, over the past year, the number of Visa cards used for installment payments has grown by more than 300. %”.

Furthermore, the company saw an almost 30% increase in the number of fintech companies that issued Visa credentials, increasing the total volume of payments from these customers by 100%.

These statistics highlight that although digital wallets are quickly becoming the norm, Visa holds a valuable position in these wallets and provides the networks needed to conduct many types of transactions.

Visa posted a record $2.8 trillion payment volume during the fourth quarter, and saw net revenue growth of 29% year-over-year β€” a far cry from becoming obsolete in the financial landscape. Thanks to this growth, its surprisingly strong position in the fintech and BNPL industries, and its 13-year dividend growth streak, Visa will be a great core ownership for dividend-growth investors.

Domino’s Pizza: 2.7% max dividend potential

Despite recording the first decline in US same-store sales in 41 quarters, Domino’s Pizza (NYSE: DPZ) He appears set to continue to dominate the pizza industry for years to come. Despite this decline in the US, the company reported 3% year-over-year overall revenue growth for the quarter, driven by strong international sales, which grew 8%.

This growth has expanded Domino’s impressive line that has recorded 111 quarters of positive in-store sales internationally, highlighting its continued successful expansion globally. With approximately 12,000 stores outside the United States, Domino’s international growth story is far from over as management ventures whose 15 largest markets alone can still add more than 6000 new locations.

Furthermore, by “fortifying” the company with stores, in-house deliveries, and a rewards program with 27 million active users, Domino’s has developed deep and profitable relationships with its customers. By maintaining in-home delivery and focusing on fortified stores, the company can keep only its customers’ experiences close at hand, generating valuable insights that can be used in its rewards program.

Given this focus on customer experience, the company’s remaining international growth trajectory, and an annual global sales growth rate of 10% over the past decade, Domino’s will add an impressive restaurant offering to any portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis β€” even if it’s our own β€” helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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