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

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

Specifically, S&P 500 stocks with healthy dividends have outperformed the index, posting 10% annualized returns versus 8% for the index as a whole since 1973. By healthy, I mean two things: a dividend that is comfortably funded by a company’s net income and a history of raising this dividend annually.

Today, we will look at three S&P 500 stocks that perfectly fit this healthy dividend profile and look like they will continue outperforming their peers in the broader index.

Image source: Getty Images.

Maximum dividend potential

Data source: Yahoo! Finance.

By dividing a stock’s dividend yield by its payout ratio, maximum dividend potential shows what a company would yield if it paid out all available income to shareholders. This quick calculation is useful for companies like the three we will look at today, as it helps highlight the potential of their small but growing dividend yields — all at today’s current share prices.

Nasdaq: 3.4% maximum dividend potential

Led by its budding software-as-a-service (SaaS) operations, diversified financial exchange Nasdaq (NASDAQ:NDAQ) grew its annualized recurring revenue (ARR) by 19% for the third quarter year over year. Posting 42% companywide SaaS sales growth year over year for Q3, these sticky sales have grown to 34% of Nasdaq’s total ARR.

Driving this SaaS growth is the company’s promising anti-financial crime unit which grew 16% organically year over year for Q3 and 106% year over year if its recent acquisition of Verafin is included. This acquisition focuses upon the market technology and fraud and anti-money laundering sector, which has an estimated serviceable addressable market of $9.5 billion. 

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

Image Source: Y-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 last three years, highlighting the higher margins generally associated with SaaS sales. While the company will never truly be a complete SaaS company due to its transaction-based trading operations, management aims for SaaS sales to account for 40% to 50% of total ARR by 2025.

With nine years of consecutive dividend increases, an improving profit margin, and a strong growth runway in anti-financial crime, Nasdaq looks poised to become a Dividend Aristocrat in time, all while delivering promising dividend growth to investors.

Visa: 3.2% maximum dividend…