3 Mid-Cap Stocks to Buy for Their Big-Time Dividends

Will Ashworth
5 min read
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Are you looking for mid-cap dividend stocks to buy? If so, you’re in luck.

I recently read about a mutual fund managed by Fenimore Asset Management, a company I haven’t heard from in some time. Based in Cobleskill, New York, a small town about 50 miles southwest of Albany, it manages $3.7 billion for individuals, institutions, and mutual funds.

The mutual fund discussed in the Nov. 29 Barron’s article was the FAM Dividend Focus Fund (MUTF:FAMEX), which focuses on mid-cap stocks paying significant dividends.

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The actively managed fund currently has $628 million in net assets invested across 28 stocks, many of which I’d have no problem owning. The top 10 holdings account for 54% of the portfolio. Morningstar.com gives it a five-star rating. It is undoubtedly a fund worth considering if you’re open to investing in mutual funds.

However, this is an article about mid-cap dividend-paying stocks. Here are three of FAMEX’s stocks to buy now.

Arthur J. Gallagher & Company (AJG)

Arthur J. Gallagher & Company (NYSE:AJG) sounds like a generic name of an accounting or advertising firm. It’s a Chicago-based property & casualty insurance broker with nearly 50,000 employees providing services in 130 countries worldwide.

The company is the largest position in FAMEX with a weight of 8.0%. Earlier in 2023, I recommended AJG stock and six other dividend stocks to buy to retire rich. I pointed out that Patrick Gallagher, the founder’s grandson, has run the company since 1995, delivering nearly a 2,400% return.

Over the same 28 years in charge, the CEO has grown the firm from $200 million in 1995 revenue to $8.41 billion in 2022. He’s done that through a combination of organic growth and acquisitions.

On Dec. 7, it announced that it had acquired Australian-based My Plan Manager, a provider of plan management services for Australians eligible for the National Disability Insurance Scheme (NDIS), which provides disability support for the 4.3 million disabled Australians. My Plan Manager is Australia’s largest provider of plan management services. No terms were released.

Gallagher’s current annual dividend rate is $2.20, yielding 0.9%.

Broadridge Financial Solutions (BR)

Broadridge Financial Solutions (NYSE:BR) is a financial services company that spends most of its time in the background providing services to the investment industry, including investor communications, securities processing and transaction clearing.

Broadridge most recently increased its quarterly dividend by 10.3% with the October 2023 payment to $0.80 a share from $0.725. The annual rate of $3.20 yields 1.7%.

In a good call from April, InvestorPlace’s Ian Bezek recommended Broadridge stock, suggesting that Morningstar valued its shares at $185, $40 more than its share price. Since then, the company’s share price has gained 32%. Over the past five years, they’re up 98%, 21 percentage points higher than the S&P 500.

The beauty of Broadridge’s business is that a significant portion of its revenue is recurring. In Q1 2024, its total revenue was $1.43 billion, 59% recurring, with $199 million in adjusted operating income, 33% higher than a year earlier. Its adjusted operating margin in the first quarter was 13.9%, 220 basis points higher than Q1 2023.

For 2024, it expects recurring revenues to grow by 7.5% at the midpoint of its guidance, new annual recurring revenue generated of $300 million, and a 20% adjusted operating margin, considerably higher than in the first quarter.

Pool Corporation (POOL)

As its name implies, Pool Corporation (NASDAQ:POOL) distributes pool supplies. However, it’s not some mom-and-pop operation. It is the world’s largest wholesale distributor of swimming pool equipment, parts, and supplies, operating more than 420 locations worldwide.

It operates in the U.S., Canada, Mexico, France, the UK, other EU countries, and Australia, with over 125,000 customers, including installers of new swimming pools, retail stores selling outdoor living products, pool and hot maintenance companies, and landscape and irrigation contractors.

Pool is one of those stocks I’ve recommended regularly over the years. In October 2020, I suggested it was a small cap worth owning. Earlier in 2020, I argued that it should be in the S&P 500. It was added to the index on Oct. 1, 2020.

I love the business because the recurring revenue is tremendous. Sure, in economic downturns, it will lose business from companies building new pools, but those maintaining pools with weekly or bi-weekly service will still need pool supplies.

Analysts are lukewarm on its stock. Of the 12 that cover it, six rate it a Buy, with a $372.50 target price. Despite its shares moving sideways since August 2022, they are up 141% over the past five years, nearly double the S&P 500.

Long-term, its chances of continuing to outperform the index are excellent.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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