Dividend stocks pay you regularly regardless of how the share price fluctuates. Ideally, of course, the share price will move steadily higher over time and make you money in two ways.
The good news is that you don't need much upfront capital to get started. Many dividend stocks are available that have relatively low share prices. Here are my picks for the smarted dividend stocks to buy with $250 right now.
1. AbbVie
You can buy one share of AbbVie (NYSE: ABBV) for less than $165. That investment will begin paying off almost immediately. The big drugmaker's forward dividend yield stands at nearly 3.8%.
Even better, you can pretty much bet on AbbVie's dividend increasing in the future. The company is a Dividend King with 52 consecutive years of dividend hikes. AbbVie's management team isn't likely to allow that streak to end anytime soon.
I think AbbVie should generate nice gains over the next few years too. Sales for Humira have declined sharply after the autoimmune disease drug lost patent protection, weighing on the company's total revenue. However, AbbVie has a solid strategy in place to bounce back.
Rinvoq and Skyrizi, the two successors to Humira, form a key part of that strategy. AbbVie expects the two drugs to rake in combined revenue of over $27 billion by 2027 -- more than Humira made at its peak.
2. Ares Capital
Another $21 or so will allow you to scoop up a share of Ares Capital (NASDAQ: ARCC). The business development company (BDC) pays a juicy dividend yield of roughly 9.2%.
Ares doesn't have as impressive of a dividend track record as AbbVie. However, the company has 15 years of steady to growing dividends. It boasts the highest regular dividend per share growth over the last 10 years among large BDCs. The company also continues to generate more than enough earnings to cover its dividend at current levels.
The U.S. direct lending market represents a $5.4 trillion opportunity. Ares Capital has only 2.4% of this addressable market, reflecting significant room for growth. The middle-market companies that Ares targets have delivered five-year revenue growth of more than 50% over the last five years, underscoring how healthy this market is.
Ares Capital has a great history of delivering exceptional total returns. Since the company's inception in 2004, it has generated a cumulative return more than 65% higher than the S&P 500 and three times greater than its peers.
3. Enterprise Products Partners
After buying one share each of AbbVie and Ares Capital, you'd have enough cash remaining from your initial $250 to buy two shares of Enterprise Products Partners (NYSE: EPD). I think this would also be a smart move, especially considering the midstream energy company's distribution yield of almost 7.1%.
Enterprise has increased its distribution for 25 consecutive years. And we're not talking about minuscule distribution hikes. The company's distribution has increased by a compound annual growth rate of around 7%.
I especially like Enterprise Products Partners' resilience. The midstream leader has generated a return on invested capital (ROIC) of 10% or more and solid cash flow in every year since 2005 -- a period which included the Great Recession, the oil price collapse of 2014 through 2017, and the COVID-19 pandemic.
Enterprise is well-positioned for growth with multiple major projects under construction. The demand for its pipelines and other midstream assets should remain strong with a growing world population driving increased usage of fossil fuels.
Should you invest $1,000 in AbbVie right now?
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Keith Speights has positions in AbbVie, Ares Capital, and Enterprise Products Partners. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
