My Top Dividend Stock To Buy In October
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If you’ve been keeping tabs on your portfolio lately, you’ve probably seen more red than green. I certainly have.
For most investors, that might feel like cause for concern, but one of the best things about dividend investing is that pullbacks are actually a gift. Just like anything else, it’s preferable to buy stocks at a lower price (and a higher yield) than the opposite.
Fear in the market creates good buying opportunities for high-quality businesses, and I think we’re seeing one of those rare opportunities with Watsco (WSO) right now, which is my top dividend stock to buy in October (you can check out some of my other top picks here).
I wouldn’t be surprised if you’ve never heard of this company since it’s incredibly niche and under-the-radar, but Watsco is the largest distributor of heating, air conditioning, and refrigeration products in the U.S.
The great thing about a business like this is that people and companies still need to keep their spaces at a comfortable temperature, no matter what’s going on in the world, which makes Watsco’s business model relatively steady and recession-resistant.
As someone who prioritizes dependable and growing income, that’s one of the main reasons I like Watsco as a potential investment.
Now even though I just covered Watsco in a video last month when it hit its 52-week low, the stock still hasn’t found a bottom yet, which makes the valuation today even more tempting than it was then.
Source: Snapstock
With that said, if you look at the recent financials, you’ll notice free cash flow has been negative for the past two quarters, which is one of the catalysts for the share price drop.
Normally, that’d be a big red flag for me. But in this case, there’s an explanation that makes sense.
Source: Snapstock
The HVAC industry just went through a big transition where old air conditioning units that relied on a now phased-out refrigerant were replaced with new models that use a different type of refrigerant.
Because of that, Watsco had to clear out a lot of its old inventory while also stocking up on the new units so its contractor customers wouldn’t face shortages or delays.
That replenishment of inventory created a temporary drag on cash flow, as we saw in the chart above, but it isn’t an inherent problem with the business itself (thank goodness).
Management has even said that most of the heavy lifting on inventory should be done this year, with things normalizing again in 2026.
Source: Snapstock
In the meantime, the balance sheet is in great shape. Watsco carries essentially no debt, which gives it plenty of wiggle room.
Source: Seeking Alpha
The dividend stats are also looking fantastic, with the forward yield sitting just over 3% and the growth rate right where we like to see it.
Putting all of this together, Watsco is definitely worth considering for long-term dividend investors. I have it on my watchlist right now, and have actually been seriously considering starting a position.
With that said, Watsco isn’t the only good buying opportunity on the market right now. It looks like there are quite a handful more, and I want to hear from you: Which discounted stocks do you have your eye on here in October? Write to me here and let me know.
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ICYMI 🎥
Need More Money To Invest In Stocks? Do This! | Ep. 38
In this episode of The Deep End, we break down why budgeting usually doesn’t work and how simple lifestyle tweaks can free up extra cash to invest without feeling like a sacrifice.
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📺 Indexes Explained - Brian Feroldi gives a great breakdown of how the three major indices (the Dow Jones, S&P 500, and Nasdaq) are all different, and why it matters.
🎧 Undelivered - Dividend cut concerns have crushed UPS stock, but this episode of The Dividend Mailbox breaks down why its scale and cash flow tell a different story.
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SINCE YOU ASKED 💬
“There are stocks like CTAS with amazing financials and strong dividend growth, yet no one seems to talk about them. Why is that? Am I missing something?"
- Jose | YouTube
This is a great question. To your point, there are a ton of solid hidden gem stocks out there, and I think there are a couple of reasons why they don’t get talked about as much.
First, most investors either stick to ETFs or, if they branch out into individual stocks, they usually go with the big, popular names that everyone recognizes and tends to talk about. Think NVDA, PLTR, GOOGL, etc.
I see this all the time when I do those short portfolio review videos on Blossom. After looking at so many portfolios, they all start to look the same because the same handful of stocks show up over and over again.
With that said, it makes sense from a psychological standpoint. There’s definitely a herd mentality in the market where it feels safer to buy what everyone else is buying.
There’s validation in knowing you own the same stocks as your friends, or as the people you follow online. And tied to that herd mentality, there’s also less risk of criticism.
If you own the same handful of stocks that everyone else does, no one’s going to call you out for being a bad investor. But if you step outside the herd with some unconventional idea, you’re opening yourself up to pushback. No one wants to deal with that, so a lot of people just go along with what everyone else is doing.
Personally, I think one of the most exciting parts about investing is finding those under-the-radar companies that most people are overlooking or have never even heard of. Not everyone is interested enough in investing to go digging for them—which is another reason why hidden gems stay hidden—but I actually enjoy the process.
Following that curiosity has led me to some great investments like Williams-Sonoma (WSM), Clear Secure (YOU), Rollins (ROL), and Zoetis (ZTS). I love finding these underappreciated ideas, watching them play out, and proving that you can still do well by doing things differently than everyone else.
And that last point definitely applies outside of your portfolio too. In many areas of your life, the best outcomes might come from the most unexpected places. Never be afraid to forge your own path.
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