The Smartest Dividend Stocks to Buy With $5,000 Right Now

Dividend stocks are the gift that keeps giving -- and as we approach the end of the year and the Christmas season, this is an ideal time to look for dividend stocks you can count on for solid returns and a consistent payout.

Dividend stocks are appealing because they're good for any investor. If you're in retirement and seeking a stable income, the best dividend stocks offer a reliable payout schedule, providing extra spending money so you don't have to dip as deeply into your retirement accounts. And if you're still years from retirement, you can either reinvest those dividends into your stocks to make your holdings grow faster, or you can put the money into a different stock altogether.

But here's the overlooked thing about dividend stocks -- to provide a good dividend, a company has to be stable, with strong earnings, and able to withstand giving that money to shareholders. Many growth stocks cannot pay dividends because they're still ramping up operations, scaling their business, or aren't profitable. But if you have a company with a long history of dividends (and dividend growth), then that indicates that management is skilled at managing cash and mitigating risk, and is focused on long-term profitability.

Here are three dividend stocks that you can buy right now. And with a $5,000 investment, these stocks will give you nearly $200 annually to reinvest on top of your annual return.

Image source: Getty Images.

Bank of America

Bank of America (NYSE: BAC) is one of the biggest banking companies in the U.S., with 3,600 locations and a network of 15,000 ATMs. The company counts nearly 70 million people and businesses as customers, where it offers personal and business banking, loans, and investment banking.

Revenue in the third quarter was $28.1 billion, up from $25.3 billion a year ago. Net income rose 23% to $8.5 billion and earnings per shares of $1.06 represented a 31% gain.

Bank of America's dividend yields 2.1%, but because the company's payout ratio is just 25% of net income, this is one of the most stable dividends you can find. You can buy 30 shares of Bank of America stock for about $1,600 and get an annual dividend payout of about $34.

AbbVie

AbbVie (NYSE: ABBV) has the highest share price of any stock on this list, at more than $200 each. But don't let the price scare you away -- this is a solid dividend stock that's raised its payout annually for the past 54 years.

AbbVie is best known for its drug Humira, which treats arthritis, psoriasis, and Crohn's disease. It also markets immunology drugs Skyrizi and Rinvoq, as well as the cancer medication Imbruvica.

Although AbbVie lost exclusivity for Humira in 2023, it's more than making up for it with fast-rising sales of Skyrizi and Rinvoq. Skyrizi revenue in the third quarter was $4.71 billion, up 47% from a year ago. Rinvoq revenue was $2.18 billion, up 35% from a year ago. Overall, AbbVie reported revenue in the quarter of $15.8 billion, up 9.1% from the same quarter of 2024.

AbbVie stock offers a generous dividend yield of 3.06%, resulting in an annual payout of $6.92 per share. Pick up seven shares at a cost of roughly $1,575 and collect more than $48 in annual dividends.

Enterprise Products Partners

While there are many investors who swear by fully integrated oil and gas companies -- those involved in exploration, transportation, and sales -- I've always gravitated to the midstream companies. And that's why I like Enterprise Products Partners (NYSE: EPD).

As a midstream energy company, Enterprise Products Partners is responsible for transporting oil and gas from wherever it is drilled to wherever it will be refined and sold. Therefore, this company doesn't have to invest in exploration, which can be very costly and doesn't always yield results. Nor is it as affected by the price of fuel as downstream companies.

Instead, Enterprise Products Partners has the infrastructure to move fossil fuels. It currently has 50,000 miles of pipeline, as well as dozens of facilities and 20 deepwater docks.

Operating income in the third quarter was $1.68 billion, down from $1.78 billion a year ago. Net income was also down slightly, $1.35 billion versus $1.43 billion.

However, Enterprise Products Partners pays a great dividend yield of 6.7%, meaning that investors get $2.18 annually for each share held. You can get 51 shares of Enterprise stock for about $1,650 and pocket more than $111 a year in dividends.

Why dividends matter

When you're looking at great dividend stocks, it's important to look at both the return and the dividend yield to get your total return. And when you do that, you can see exactly how important it is to reinvest your dividends. Here's the five-year performance for each of these companies and what your investment would look like had you put $1,666 in each.

Data source: YCharts.

As you can see, investing $5,000 in these three stocks five years ago would have gotten you a nice return of almost 83% even if they didn't pay dividends. However, if you had collected the dividends and reinvested them in the stocks, your investment would have increased from $5,000 to nearly $11,500 in just five years, yielding a total return of more than 129%.

Dividend stocks may not get the attention that high-flying tech stocks garner, but they can be powerful additions to your investment portfolio. These three stocks are excellent choices for anyone seeking to generate stable income and substantial returns.

Bank of America is an advertising partner of Motley Fool Money. Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends Enterprise Products Partners. The Motley Fool has a disclosure policy.