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The Smartest Dividend Stocks to Buy With $400 Right Now

Building a retirement portfolio can seem like an impossible challenge, especially early on in your investing journey. Most of us don't have tons of extra cash we can pour into the stock market.

However, time is an asset that people often wildly undervalue. The power of compounding can create some eye-popping returns as the years roll by. And those returns are amplified even more by automatic reinvesting of a steadily growing dividend.

With that in mind, let's look at a few attractive dividend stocks you could put just a few hundred dollars into today with an eye toward triple-digit returns over time. Read on for some good reasons to buy Sherwin-Williams (NYSE: SHW), Coca-Cola (NYSE: KO), and McCormick (NYSE: MKC).

Watching paint dry

While most of the attention-grabbing headlines have been in the tech niche lately, Sherwin-Williams has quietly been trouncing the market. The paint seller's stock is up over 1,100% in the past decade compared to the broader market's 300% increase.

Image source: Getty Images.

That's no fluke. Sherwin-Williams has a dominant hold on a global industry that's seen steady growth over the decades. And through assets like its brand power, huge sales footprint, and innovative prowess in areas like indoor and outdoor paint, it has proven it can raise prices faster than inflation. This strength shows up in its operating margin, which recently touched a 10-year high at 16% of sales.

SHW operating margin (TTM) data by YCharts. TTM = trailing 12 months.

Sherwin-Williams' latest dividend hike was a head-turning 23%. The company has a long track record of annual hikes too with 42 consecutive raises under its belt. Yes, the stock is near all-time highs here in mid-September along with most of the market. But it's a smart bet to invest in this Dividend Aristocrat over the long term.

Sparkling earnings

Fears about lingering pandemic pressures have caused Coca-Cola's stock to lag the 2021 stock market rally. That could be a great opportunity for patient investors to bulk up on an attractive dividend payer.

Coke owns hundreds of the world's most popular beverage brands across sodas, waters, sports drinks, juices, and teas. Its distribution platform is arguably just as valuable since it would take billions of dollars (and years of effort) for any competitor to even hope to match up.

The pandemic showed how Coke's business is highly dependent on consumers being mobile and visiting places like theme parks, restaurants, and sporting events. A return to these activities caused a sharp growth rebound in the most recent quarter, but further COVID-19 outbreaks might pressure sales in the second half of 2021.

Yet, smart investors might look past that volatility to pick up Coca-Cola shares at a relative discount today to the wider market as they patiently wait for sales growth trends to normalize.

Spicing up the portfolio

Even a small bet on McCormick stock today might pay huge dividends in a decade or two. The spice and flavorings giant has a long track record of outpacing the attractive consumer packaged foods niche. Sales frequently expand faster than peers like PepsiCo (NASDAQ: PEP), and profitability is rising too, thanks to its push into condiments and hot sauces.

McCormick has been steadily raising its dividend for several decades while also delivering cash directly to shareholders through stock buybacks. That repurchase program took a back seat to acquisitions in recent years but is due to accelerate again, management told investors recently. After all, McCormick is now producing over $1 billion in annual operating cash, giving the company more than enough resources to extend its market share lead.

It's true that a few hundred dollars in any of these stocks won't be enough to make a big dent in your retirement savings plan. But steadily investing even small sums allows returns to compound over time, giving you a great shot at building an impressive nest egg.

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Demitri Kalogeropoulos owns shares of Sherwin-Williams. The Motley Fool recommends McCormick and Sherwin-Williams. The Motley Fool has a disclosure policy.


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