For investors looking for a steadily growing dividend with meaningful long-term growth potential, Pool Corporation (POOL 0.99%) is a great option. Sure, it is a cyclical company -- and the cycle it faces now may not be exciting for investors. But it generates recurring sales from Pool maintenance products (something needed in any market environment); and its strong cash flow has historically supported both dividend growth and share repurchases, even through periods of softer sales growth. And eventually this cyclical company will likely go through a period in which sales growth picks back up significantly.
Further, Pool Corp. has a low payout ratio, leaving plenty of room for dividend growth over the long haul. And more recently, there are signs that business trends are finally improving after a prolonged lull.
Image source: Getty Images.
Improving business trends
In a slow-moving housing market with high interest rates, pool sales haven't fared well. Intuitively, this makes sense. Pool construction and remodels are often financed purchases. Additionally, lower turnover of home sales means fewer consumers are considering the types of projects often associated with moving into a new home, such as pool construction and pool remodeling.
To show you a glimpse of the pressure Pool Corp.'s business has faced, just look at its full-year 2024 results. Sales in the period declined 4% year over year to about $5.3 billion.
But trends are improving at Pool Corp. After reporting a 4% year-over-year decline in revenue for the first quarter of 2025, net sales returned to growth in Q2. Sales for the period rose 1% year over year. And this pattern continued in Pool Corp.'s most recent quarter when third-quarter sales rose 1% year-over-year to about $1.5 billion. Further, Pool Corp.'s earnings per share also returned to growth for the last two quarters, rising 4% year over year for both periods.
While management noted in Pool Corp.'s most recent earnings call that permit data for pool construction has been "very sporadic," the totality of the data the company receives, including commitments from building and remodeling customers suggests things have started to firm up, said CEO Peter Arvan during the call.
Combining this news about the environment becoming more favorable for Pool Corp with the fact that the company is up against some easy comparisons, it wouldn't be surprising to see a further acceleration in Pool Corp.'s business throughout 2026.
Pool Corp.'s attractive dividend
Looking at Pool Corp.'s dividend, it's solid. Not only is Pool Corp.'s 2.1% dividend yield higher than the 1.1% dividend yield of the S&P 500 or the 0.6% dividend yield of the NASDAQ 100, but Pool Corp.'s payout ratio is less than 50% -- at about 45%. In other words, the company is paying out less than 50% of its earnings and dividends. This means Pool Corp. has plenty of room to continue increasing its dividend even if earnings growth remains suppressed.
On a similar note, Pool Corp has consistently reported strong operating cash flow -- plenty to cover its dividend payments. Cash provided by operating activities for the nine months ended September 30th was about $286 million. Yet, dividends paid during this period were just $139 million.
Additionally, Pool Corp. has a long history of dividend growth. Its most recent dividend increase came in the spring of 2025 when the company raised its payout by 4%. The company has increased its dividend every year for 15 years in a row.
NASDAQ: POOL
Key Data Points
What ultimately makes the stock a buy
Well, Pool Corp's easy comparisons, accelerating business trends, and attractive dividend are all compelling reasons to consider this dividend stock. The main reason I'm calling it my top dividend stock to buy in January is the valuation. Of course, valuation alone wouldn't be enough of a reason to buy this stock. But it is what seals the deal for me.
Shares have fallen about 29% over the last year, giving the stock a price-to-earnings ratio of 22, making this a good time to buy the stock. What's particularly compelling about this valuation is that this is a price-to-earnings multiple on earnings that are cyclically depressed. As the company's business trends pick up and revenue growth accelerates, Pool Corp will likely benefit from operating leverage, and earnings growth will likely rise faster than sales.
There are some key risks, including the possibility of a stubbornly slow housing market for much longer than investors expect, or even a housing downturn. Of course, the biggest risk of all to Pool Corp. is probably rising interest rates. For now, however, interest rates have been on the decline, albeit slowly.
Even with these risks considered, I think now is a great time to buy Pool Corp. stock.
