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

Dividends can be described as the gift that keeps giving, as dividend stocks can supply you with passive income for years or even decades. The good news is that it's easy to build up a portfolio of dividend stocks with a wide selection of stocks out there, but the key is to select the right ones to own.

Companies with strong business models, well-known brands, and that are leaders in their field are a good first filter. You also need to ensure that they churn out consistent free cash flow and boast a track record of raising their dividends over the years or even decades. Once you have identified these stocks, you should buy and hold them over the long term and enjoy the dividends that flow into your bank account.

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Here are three dividend stocks that you may want to buy with $5,000 of your savings.

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Parker-Hannifin

Parker-Hannifin (NYSE: PH) is a leader in motion and control technologies and serves the industrial and aerospace markets. The company has demonstrated steady revenue and net income growth over the years, as shown in the table below. Gross margin has also steadily crept up over the same period, with free cash flow increasing in tandem.

Data source: Parker-Hannifin. Fiscal years end June 30.

Parker-Hannifin continued to report solid results for the first nine months of fiscal 2025. Although revenue stayed flat year over year at around $1.46 billion, the company managed to improve its gross margin once again, from 35.7% to 36.7%, resulting in gross profit inching up 1.8% year over year. Free cash flow was healthy, rising almost 8% year over year to $2 billion. The company recently upped its quarterly dividend by 12% year over year to $1.80 per share, marking its 69th consecutive year of dividend increases.

Parker-Hannifin maintains a No. 1 position within the motion and control industry and has more exposure to longer cycles, along with secular growth trends that can help to grow its revenue and profits further. The company's acquisitions of Clarcor, a manufacturer of filtration products and technologies, and Meggitt, which sells aerospace and defense technology and products, also help to increase its capabilities and expand its suite of products for customers. For fiscal 2025, Parker-Hannifin sees the most growth coming from the aerospace and defense sector and expects to generate free cash flow of around $3.1 billion. This consistent increase in free cash flow should continue to power dividends higher for the foreseeable future.

W.W. Grainger

W.W. Grainger (NYSE: GWW) is a distributor of maintenance and repair products for businesses and institutions. The business has demonstrated a steady path to growing its revenue and net income, as shown in the table below. Grainger also churned out consistent free cash flow over the years, which supported increased dividend payments for 54 years.

Data source: Grainger.

The company continued to churn out healthy free cash flow during the first quarter of 2025. Revenue rose 1.7% year over year to $4.3 billion while operating profit crept up 0.4% year over year to $672 million. Net profit increased marginally by just 0.2% year over year, but the business continued to churn out healthy free cash flow of $521 million for the quarter. The company upped its quarterly dividend by 10% year over year to $2.26 per share.

Grainger has an impressive portfolio offering of around 2 million maintenance, repair, and overhaul (MRO) parts that give it a strong competitive edge. The company provided an encouraging full-year guidance for sales to increase by between 2.7% and 5.2% year over year for 2025. Earnings per share are projected to stay constant or increase by up to 6.5% year over year. These numbers incorporate the effect of Trump's tariffs and assume that any additional cost increases are mitigated by higher pricing. Grainger's leading position allows it to raise prices without suffering from a corresponding fall in demand, thus allowing the business to continue churning out healthy free cash flow with the potential for higher dividends in the years ahead.

Procter & Gamble

Procter & Gamble (NYSE: PG) is a consumer goods giant that manufactures and sells toiletries, grooming, and healthcare products under famous brand names such as Pantene, Olay, Gillette, and Oral-B. The company may not display fast growth, but it has been steadily increasing its top and bottom lines over the years, as shown in the table below. Investors should note that 2024 included a $1.3 billion intangible asset impairment charge; net income would have been much higher. The business also churns out rising free cash flows, which have contributed to Procter & Gamble raising its dividends without fail for 69 consecutive years.

Data source: Procter & Gamble. Fiscal years end June 30.

The consumer goods behemoth reported a sturdy set of earnings for the first nine months of fiscal 2025. Revenue dipped by 0.2% year over year to $63.4 billion, but operating income shot up nearly 10% year over year to $16.1 billion. Stripping out the asset impairment charge for fiscal 2024, operating income would still have inched up 0.5% year over year. Core net profit dipped by 5.5% year over year to $12.3 billion. Free-cash-flow generation remained healthy at $10.1 billion for the period, and Procter & Gamble raised its quarterly dividend to $1.0568 per share, up 5% from the previous $1.0065.

Procter & Gamble held an Investor Day session last year in which management highlighted several areas to focus on to continue growing the business. The company will focus on improving its supply chain and building up its digital capabilities. Procter & Gamble is embarking on a two-year non-core restructuring exercise involving selected brand divestments as the business rationalizes its portfolio. Production efficiency will be emphasized as the company realigns its supply chain, and management will work on redesigning the organization to enable integrated and quicker decision-making. The company is targeting organic sales growth that exceeds the market, while core earnings per share are projected to rise by mid to high single digits every year as margins improve. With continued copious free-cash-flow generation, Procter & Gamble is well positioned to continue raising its dividend.

Should you invest $1,000 in Parker-Hannifin right now?

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Royston Yang has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.