1 of the Smartest Dividend Stocks to Buy With $1,000 in 2025

Key Points

• Badger Meter helps modernize outdated water and sewer utilities.

• The company's margins have rapidly improved over the last decade.

• Burgeoning cash generation provides ample funding to give back to shareholders via a rising dividend.

• 10 stocks we like better than Badger Meter ›

Had an investor bought $1,000 worth of stock in Badger Meter (NYSE: BMI) and its water management solutions in 1990 and held until today while reinvesting dividends, it would be worth $288,000.

While the water innovation leader will be hard-pressed to repeat those results over the next 35 years, Badger Meter stock is still only at a $5 billion market cap despite this incredible run.

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Simply put, Badger Meter's growth story has plenty of room to run, and it looks like an excellent dividend growth stock to consider if you have $1,000 available to invest right now -- especially with its shares down 32% from their highs.

Badger Meter's top-tier sales and dividend growth

Though the company's flow measurement and advanced metering infrastructure products don't typically elicit thoughts of massive growth potential, Badger Meter has proved otherwise.

Its sales and free cash flow (FCF) have grown by 15% and 16% over the last five years, while management has increased the dividend by 14% at the same time.

With most water and sewer utilities in the United States still largely mechanical and outdated, Badger Meter's end-to-end BlueEdge solution aims to bring these utilities into the modern era.

Image source: Getty Images.

Whether it is the company's continuous monitoring, always-on connectivity, or its full suite of software solutions, the products will only become more important over time as regulations tighten and quality standards increase.

In addition to having the support of this decades-long megatrend, Badger Meter has an excellent track record as a serial acquirer. It has scooped up 14 companies since 2010 and is continuously reinforcing its leadership position.

Adding numerous software and technology solutions via these acquisitions, the company's FCF margin has jumped from 6% in 2015 to 18% today as its software-as-a-service (SaaS) sales balloon.

This burgeoning FCF generation is what makes Badger Meter such a promising dividend growth investment for investors.

While its 0.8% dividend yield may not be jaw-dropping, it only uses 25% of the company's FCF to make dividend payments to shareholders. This figure shows there is a lot of room for further dividend growth, especially as Badger Meter's FCF margin continues to trend higher.

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Josh Kohn-Lindquist has positions in Badger Meter. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.