Many people assume that dividend stocks are good only for income. The reality is that companies that pay dividends, especially those that increase those dividends, tend to perform well over the long term. Why? Think about it. Companies need to continually grow to afford to send cash to shareholders each year.
Here are three dividend-paying financial stocks to buy in February. They have wide competitive moats and the growth to pay you, year in and year out, for the foreseeable future.
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1. Intuit
One of the world's largest software companies, Intuit (INTU 0.52%), owns several popular financial software products, including TurboTax, Credit Karma, QuickBooks, and Mailchimp. The company has paid and raised its dividend for 14 consecutive years and still has a payout ratio of just 21% of earnings estimates.
NASDAQ: INTU
Key Data Points
Intuit has dropped on fears that artificial intelligence will disrupt software stocks. That doesn't seem likely for Intuit, which has substantial user data and advantages in areas like customer trust. In other words, are most people going to risk ChatGPT doing their tax return incorrectly? Probably not anytime soon.
The stock now trades at less than 22 times forward earnings, an appealing valuation, with analysts calling for 14% annualized earnings growth over the next three to five years. Intuit is one software stock you may want to buy on the dip.
2. Visa
Global payment network leader Visa (V +0.41%) provides one of the best examples of network effects, meaning the business becomes stronger as more people use it. Merchants almost everywhere on Earth already use Visa's network, so there is very little room for competition.
Visa charges a small fee on each transaction on its network, much like a tollbooth. Visa doesn't need to invest much in its network, so revenue is growing faster than its expenses. That has made Visa more profitable as it grows and has also made it an outstanding dividend stock. The company has increased its dividend for 16 consecutive years.
NYSE: V
Key Data Points
The stock currently trades at 25 times earnings estimates, a solid buying point given that analyst estimates call for 13% annualized growth over the coming years. Visa's dividend still accounts for only a fraction of its earnings, so this is another stock with a long runway for dividend increases.
3. S&P Global
Unlike the first two on this list, S&P Global (SPGI +0.34%) is already a legendary dividend stock. The company's history dates back generations. S&P Global is a leading provider of credit ratings and financial data to investors across global financial markets.
S&P Global's history and authority make it unlikely that any competitor will unseat it. And since debt fuels the global economy, business is relatively steady for S&P Global. The company is a Dividend King, meaning it has raised its dividend for at least 50 uninterrupted years.
NYSE: SPGI
Key Data Points
The stock trades at 26 times earnings, a premium valuation for the anticipated 11%-12% earnings growth expected by Zacks, reflecting its strong business fundamentals. However, it's hard to find a more dependable dividend stock. Investors can confidently buy and hold S&P Global for the foreseeable future.
