Why Pool Corporation Is a Strategic Dividend Buy in January 2026

In a market increasingly wary of overvalued equities, Pool Corporation (POOL) emerges as a compelling case for value investors seeking dividend growth. With a forward P/E of 22.33, a 2.1% yield, and a conservative 45% payout ratio, the stock is positioned to capitalize on cyclical rebounds and earnings acceleration in 2026. After a 30% decline in 2025, the company's fundamentals suggest a mispricing that savvy investors can exploit.

A Value Play Amid Market Volatility

Pool's valuation metrics stand out against broader market concerns. As of late 2025, the stock trades at a P/E of 22.33, well below its historical average and significantly cheaper than the S&P 500's stretched valuation. This discount reflects macroeconomic headwinds, including inflation and rising living costs, which have dampened discretionary spending on pools and related services. However, these same pressures have pushed the stock to a cyclical low, creating an entry point for investors who recognize the company's resilience.

For context, Pool's trailing 12-month EPS of $10.86 and a stock price of $228.75 yield a P/E of 21, aligning with its historical range during economic downturns. Analysts like CFRA argue the stock is undervalued, raising their price target to $304, while others remain cautious. Yet, the consensus is shifting: the company's updated 2025 guidance of $10.81–$11.31 per share suggests earnings stability, even as revenue growth slows.

Dividend Safety and Growth Potential

Pool's 2.1% yield, above the S&P 500's 1.5% average, is underpinned by a conservative 45% payout ratio. This metric, derived from the company's $303 million in 2025 shareholder returns, highlights management's commitment to balancing dividends with reinvestment. A 45% payout ratio provides a buffer against earnings volatility, ensuring sustainability even during downturns.

The yield itself is attractive in a rising interest rate environment. With the 10-year Treasury yielding 3.8% as of late 2025, Pool's dividend offers a compelling risk-rebalance trade-off. Moreover, the company's digital transformation-driven-by its POOL360 platform-has boosted efficiency and margins. In Q3 2025, 17% of sales were digital, a record that underscores long-term growth potential.

Earnings Acceleration in 2026

The setup for earnings acceleration is clear. Pool's 2025 guidance implies a trough in its performance, with Q3 2025 EPS of $3.39 exceeding estimates. Management attributes this to strategic price optimization and growth in maintenance and building materials, sectors less sensitive to economic cycles. Meanwhile, the company's physical expansion-four new sales centers in Q3 2025-positions it to capture market share as demand rebounds.

Looking ahead, analysts project 13.34% EPS growth in 2026, from $11.32 to $12.83 per share. This trajectory, combined with a P/E of 22, suggests a 2026 price target of $285–$290, a 29% upside from late 2025 levels. The ASU 2016-09 accounting benefit, which adds $0.11 to 2025 EPS, further cushions the path to this target.

A Contrarian Case for 2026

While the broader market grapples with valuation concerns, Pool's discounted metrics and defensive business model make it a strategic buy. Its focus on essential services (maintenance, building materials) and digital innovation insulates it from discretionary spending swings. The 45% payout ratio ensures dividend safety, while the 2.1% yield offers immediate income.

For value investors, the key is timing. With earnings troughed in 2025 and a path to 2026 growth, now is the moment to lock in a low entry point. As Stifel and Wells Fargo caution, near-term risks remain, but the margin of safety provided by Pool's valuation and payout discipline justifies a long-term position.