Why My Top Dividend Stock Idea in February Is the Same as It Was Last Month

It's been an interesting start to 2026, featuring significant volatility in some of the "Magnificent Seven" stocks and huge drawdowns in many software stocks. Investors are doing their best to assess the impact the continued AI (artificial intelligence) boom will have on companies.

But investors don't always need a company tied closely to the market's latest buzz words to do well. One stock that has significantly outperformed the market is Pool Corporation (NASDAQ: POOL), a pool supplies distributor. The stock is up more than 14% year-to-date as of this writing, and I believe there's more upside ahead over the long haul.

Below is why this month I'm rerecommending Pool Corp -- the same stock I recommended in January -- as my absolute top dividend stock idea to buy now.

Image source: Getty Images.

It's an anti-AI bet

The first reason I think Pool Corp is a good dividend stock to buy now has less to do with its dividend and more to do with its specific business model and how it counters much of the speculation we are seeing in the market right now about AI.

Many tech companies have been unveiling huge investment plans for AI. Meta Platforms, Alphabet, and Amazon, for instance, have all disclosed plans to spend well over $100 billion on capital expenditures this year, with a large portion of this spending going toward AI-capable cloud computing infrastructure. In fact, Amazon's budget is for "about $200 billion" in capital expenditures in 2026, making it the most aggressive of the three. These big-spending plans mean investors just have to trust that these massive bets will work out profitably over time, since there's no way to know if they will.

Pool contrasts this with a straightforward business model in which it has already demonstrated substantial profitability. On sales of about $1.5 billion in Q3, the company generated $127 million in net income. Further, the company's earnings-per-share growth of 4% outpaced its anemic year-over-year revenue growth of 1%. This contrasts with how big spending is starting to weigh on some tech giants. Meta's fourth-quarter earnings per share, for instance, rose 11% even though revenue climbed 24%. This occurred due to Meta's operating margin declining from 48% in the year-ago quarter to 41%. Deleveraging like this could affect many tech companies in 2026 and beyond, as their AI spending puts pressure on margins.

Why sales growth could accelerate

Even more, Pool Corporation is currently operating in a very challenging macroeconomic environment, where large discretionary purchases have been pressured by elevated interest rates. But sales growth could explode higher if interest rates decline over time. And even if they don't, over 60% of the company's sales come from non-discretionary Pool maintenance sales, which perform consistently well for the company. So even if sales from non-discretionary pool projects remain challenged, sales growth should accelerate over time as the company faces increasingly easier comparisons for that part of its business.

Further, for what it's worth, management said there were "encouraging signs of stabilization in both new pool construction and remodel" during its third quarter. While there's no guarantee that this part of Pool's business starts to recover, it also should not be ruled out. At some point, aging pools need to be replaced, and new projects could ramp up even with current interest rates if demand for pools increases.

Finally, regarding Pool's dividend specifically, investors who buy the stock today benefit from a robust dividend yield of 1.9%. Further, the company's payout ratio of 45% leaves ample room for dividend growth over the long term.

And Pool is returning capital to shareholders indirectly through share repurchases, too. The company repurchased $164 million worth of shares in the first 9 months of 2025 -- not bad for a company with a market capitalization of $9.8 billion as of this writing.

Overall, Pool looks attractive at its current valuation of 24 times earnings. While there's a risk that sales could suffer if the challenging market for pool construction and remodeling worsens, there's significant upside potential if it recovers. In aggregate, I think the stock offers a balanced risk-reward profile and a nice contrast to the market's significant (and potentially a bit euphoric) appetite for AI-related risks at the moment.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool recommends Pool. The Motley Fool has a disclosure policy.