A little money can go a long way. That's especially the case when you invest in stocks that pay you to own them.
I'm referring to dividend stocks, of course. Investors can find plenty of great stocks that offer attractive dividends and don't cost too much. Here are my picks for the smartest dividend stocks to buy with $100 right now.
1. Ares Capital
You can scoop up a share of Ares Capital (ARCC 1.50%) for roughly $23 at its current price. I think doing so might be one of the best investments you can make, especially if you're looking for income.
Ares Capital's forward dividend yield stands at 8.4%. Why is the yield so high? Ares Capital is a business development company (BDC). To be exempt from federal income taxes, BDCs must return at least 90% of their earnings to shareholders as dividends. And Ares Capital generates a lot of earnings to give to its shareholders.
A key reason why that's the case is the nature of the company's business. The demand for direct lending offered by BDCs is rising due to several factors, including the speed of closing deals and the reliable access to capital during volatile periods. The total addressable market for direct lending is around $3 trillion for the traditional middle market of U.S. companies with annual revenue between $100 million and $1 billion. It jumps to $5.4 trillion if companies with annual revenue of over $1 billion are included.
Also, Ares Capital stands head and shoulders above its peers. It's the largest publicly traded BDC with deep relationships in the market. Ares also has delivered greater dividend per share growth and total returns over the last 10 years than its top rivals.
2. Enterprise Products Partners
Another $34 or so will buy you a share of Enterprise Products Partners (EPD 0.99%). Technically, you'll get a unit of the midstream energy leader rather than a share because it's a limited partnership (LP). Investing in LPs comes with some tax hassles, but I think Enterprise Products Partners is worth the extra work.
Enterprise's forward distribution yield is a lofty 6.35%. Want even better news? The LP has increased its distribution for 26 consecutive years.
I like that Enterprise Products Partners' business holds up well during recessions and turbulent times. Inflation doesn't impact it very much because roughly 90% of its long-term contracts feature price escalation provisions. Enterprise's cash flow doesn't ebb and flow with oil and gas price fluctuations, either. The company charges the same amount for using its pipelines regardless of commodity prices.
Those aren't the only reasons why Enterprise is a smart investment right now. Its valuation is attractive with a forward earnings multiple of 11.5. I also think the second Trump administration will implement favorable policies for midstream companies like Enterprise.
3. Pfizer
After investing in Ares Capital and Enterprise Products Partners, you should have in the ballpark of $43 left over from an initial $100. That's more than enough to buy one share of Pfizer (PFE 1.03%), which currently trades below $27 per share.
Pfizer's forward dividend yield of 6.54% is near the highest level in 15 years. The drugmaker's dividend appears to be safe, too. Management consistently places maintaining and growing the dividend as the company's top capital allocation priority.
Granted, some might wonder whether or not buying Pfizer now is such a smart idea. Several of the company's drugs will lose patent protection over the next few years. Pfizer also estimates a negative impact of around $1 billion on its revenue this year from the Inflation Reduction Act.
I like Pfizer's prospects over the second half of the decade, though. It has multiple newer products driving growth and a promising late-stage pipeline. The stock is also dirt cheap, with shares trading below nine times forward earnings.
