Buy This Outstanding Dividend Stock While It’s Down

• Tough comparisons from pandemic highs are hiding the beauty of Pool Corp.’s lucrative business.

• A decline in the stock’s price has pushed the pool supplier’s dividend yield higher.

• Pool Corp. has a shareholder-friendly capital return program.

• 10 stocks we like better than Pool ›

In a choppy market like we’ve seen in 2025, dividend stocks can bring welcome stability to a portfolio. Regular quarterly dividend payments are highly predictable, provide cash to reinvest in other opportunities, and deliver a near-term cash return. These traits are attractive in any market — but especially during periods when stock prices move lower.

Of course, this doesn’t mean investors should wait for a bear market to buy stocks like this. Indeed, market pullbacks are usually when investors wish their portfolios had been more overweight in dividend stocks ahead of time. Not only are dividend stocks sometimes more resilient in market pullbacks than growth stocks, but the cash streams they pay investors also help offset the pain of unrealized losses.

Given the uncertain environment we are in now, it may make sense for some investors to bulk up their portfolios with more dividend-paying stocks. One that has taken a beating recently and looks particularly attractive is Pool Corp. (NASDAQ: POOL), a supplier of pool maintenance and construction supplies. Here’s why you might want to consider adding it to your portfolio.

Shares of Pool Corp. have declined by about 11% so far in 2025. But the stock’s decline doesn’t reflect a broken business, just a normalization of demand after a historic boom. Fueled by both the pandemic and low interest rates, spending on outdoor living surged in 2020, 2021, and 2022. That led to a spike in pool installations and aftermarket product demand. Now that the industry is coming down from those unusual highs, Pool is simply retrenching.

Revenue in the first quarter of 2025 fell 4% year over year to $1.07 billion. But management noted that sales only declined 2% when the same selling days of the year-ago quarter and the most recent quarter were compared. This was “consistent with the 2% decrease we saw in the fourth quarter of 2024, which was an improved sequential trend from earlier in 2024,” management explained in the company’s first-quarter earnings release.

The company noted that maintenance-related product sales supported overall sales, with chemical volumes growing 1% alongside double-digit growth in private-label chemical products. Sales related to new pool construction continued to weigh on results.

Still, this business is far from struggling. Most of Pool’s revenue comes from maintenance and repair, not new pool construction — meaning the company has a stable, recurring demand base. In fact, roughly 60% to 65% of sales come from recurring maintenance-related products, like chemicals, equipment, and accessories.

Further, the company remains highly profitable. Gross margin was 29.2%, and management reiterated full-year guidance for 2025 earnings per share in the range of $11.10 to $11.60. Pool Corp. trades at 27 times the midpoint of this guidance range for earnings — a reasonable valuation for a dominant niche business with durable cash flow.

But the real value lies in the company’s ability to return capital to shareholders, starting with its consistent dividend growth. Over the last 10 years, Pool’s dividend has grown at a compound annual rate of nearly 20%. Even as earnings have temporarily declined, management has maintained its commitment to growing the dividend in line with long-term earnings power.

In addition to the dividend, Pool returns capital to shareholders indirectly via share repurchases. Indeed, the company announced an increase in its share repurchase program to $600 million. This added about $309 million to the approximately $291 million remaining under its existing authorization. This expansion underscores the company’s confidence in its long-term prospects and commitment to shareholder value.

Sure, the stock hasn’t performed well recently. But this is arguably due to the market’s short-term focus on recent year-over-year declines in sales and earnings. A long-term view, however, suggests this might be a classic overreaction. The underlying business remains strong, the company is still highly profitable, and management is executing a disciplined capital return strategy.

Moreover, the long-term story remains intact: The number of in-ground pools in the U.S. continues to grow slowly but steadily, and Pool’s dominant distribution network gives it a major competitive edge. With more than 445 sales centers and deep relationships with pool professionals, it would be extremely difficult for a competitor to replicate its scale.

Yes, there are risks. A further slowdown in consumer discretionary spending, persistently high interest rates, or a housing market downturn could impact demand. But Pool’s large aftermarket exposure and strong balance sheet help mitigate those risks. And investors are being paid to wait, with a steadily growing dividend and regular buybacks.

For long-term investors looking to add a shareholder-friendly, resilient business to their portfolios, Pool Corp. looks like a smart buy while the stock is down.

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Daniel Sparks and his clients have 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.

Buy This Outstanding Dividend Stock While It’s Down was originally published by The Motley Fool