Affordable Dividend Yields Range from 4 to 9 Times Market Average
Top Dividend Stocks Offer Attractive Yields for 2025
In the ever-evolving world of investments, a select group of dividend stocks continues to stand out for their high yields and potential value. Here are some of the top picks for 2025, along with reasons for their undervaluation.
Atlas Energy Solutions (AESI) trades at 5.7 times estimates for cash flows, offering an attractive PEG ratio of 0.75. Despite a recent halt in dividend hikes, AESI's strong cash flow generation ensures more than enough funds to cover the payout. Shares have been impacted this year, with a 45% drop in value. However, the company's renewable energy-focused business and low-beta status make it a resilient choice for income investors.
AES Corp. (AES) is another attractive dividend stock, trading at a cheap 5 times cash-flow estimates. Its renewable energy-selling business adds to its growth potential, and a PEG ratio of 0.6 implies that AES is also cheap compared to its growth estimates. AES is known for its stability, making it a more insulated choice during market pullbacks.
ExxonMobil (XOM) offers a forward dividend yield of 3.61%, trading about 18% below Morningstar's fair value estimate of $135 per share. XOM's commitment to traditional oil and gas rather than shifting aggressively to renewables has led some investors to view it as a risk or less future-proof. However, the company's stable dividends and strong dividend aristocrat status make it an appealing choice for income investors.
Merck (MRK) is a strong drug manufacturer with a steady dividend, offering a forward dividend yield of 4.09%. Its shares are considered attractively valued within the Morningstar Dividend Yield Focus list due to a combination of stable earnings and dividend safety, though specifics on discount valuation were not detailed.
PepsiCo (PEP) is a dividend stock with an economic moat and stable dividend history. It trades at a good valuation due to its defensive consumer goods profile but may be overlooked during market shifts favoring growth sectors.
U.S. Bancorp (USB) offers an attractive dividend yield and valuation to dividend-focused investors. Potential undervaluation is linked to macroeconomic or sector-specific concerns in banking, despite solid dividend prospects.
Barrick Mining Corporation (B) is restructuring by selling lower-margin or aging mines, focusing on assets with better returns (copper and long-life gold projects). This restructuring has generated uncertainty that keeps the price low despite strong fundamentals and expected growth.
Clearway Energy is an ultra-high-yield stock with safe dividend income prospects for 2025, valued attractively compared to risk due to clean energy assets' short-term market concerns but stable cash flow long term.
Healthpeak Properties is another ultra-high-yield stock focused on real estate investment trusts (REITs). Market mispricing due to interest rate concerns affecting REIT valuations has contributed to its undervaluation, although underlying property income remains steady.
Other notable mentions with strong dividends but less specific valuation discount information include Medtronic, Mondelez International, Lockheed Martin, and Amcor.
Edison International (EIX), the parent of regulated utility Southern California Edison (SCE), generates much of its electricity from renewable sources including solar, wind, and hydro. EIX also has a second business, Trio, a global energy advisory firm.
Kodiak Gas Services (KGS) is an energy services firm that provides natural gas compression services, mostly in the Permian Basin of Texas and New Mexico. KGS trades at roughly 6 times cash flow estimates and a low PEG of 0.13. The company started a dividend and raised it twice since its announcement to acquire CSI Compressco LP.
United Parcel Service (UPS) currently pays $6.56 across four quarterly dividends, which is 99% of its adjusted EPS. UPS trades at roughly 8 times cash-flow estimates and has never offered a better yield in its 26 years of trading. However, the company pulled its full-year revenue and profit forecasts in April, adding to its market woes.
These dividend stocks often appear cheap due to sector-specific headwinds, macroeconomic effects, or market rotation away from dividend payers towards growth stocks. Their strong dividend yields combined with economic moats and undervaluation make them attractive for income investors in 2025.
Investing in finance involves considering a variety of stocks for retirement income. Dividend stocks like Atlas Energy Solutions (AESI), AES Corp. (AES), ExxonMobil (XOM), Merck (MRK), PepsiCo (PEP), U.S. Bancorp (USB), Barrick Mining Corporation (B), Clearway Energy, Healthpeak Properties, Edison International (EIX), Kodiak Gas Services (KGS), and United Parcel Service (UPS) stand out for their high yields, value, and potential growth. Personal-finance-focused individuals might find these stocks appealing as they are often undervalued due to sector-specific headwinds, macroeconomic effects, or market rotation away from dividend payers towards growth stocks.
