Three Worthy Dividend-Yielding Shares to Purchase Amidst Potential Stock Market Selling Spree in 2025
Three Worthy Dividend-Yielding Shares to Purchase Amidst Potential Stock Market Selling Spree in 2025
Individuals anxious about a potential market crash may feel compelled to ditch their investments and flee. However, seasoned investors recognize that it's a blunder to fundamentally alter your investment strategy based on emotions.
A more prudent move is to guarantee that your portfolio consists of companies which align with your risk tolerance and contribute towards your financial goals. Dividend stocks are an excellent method to generate passive income with no need to sell your shares.
Reliable choices include firms such as Lockheed Martin (LMT -0.21%), American Water Works (AWK -0.69%), and Kenvue (KVUE -0.88%), all boasting durable business models and an emphasis on raising dividends. Here's why these dividend stocks are promising purchases in 2025.
1. Lockheed Martin
Following an all-time high early this year, Lockheed Martin and its defense sector peers have experienced a significant decline over the past few months, likely due to concerns over valuation. Lockheed's P/E ratio has now reverted to 17.6 - close to its 10-year median P/E of 17.9.
Lockheed encompasses a broad portfolio of segments including aeronautics, missiles and fire control, rotary and mission systems, and space (primarily satellites). Despite its diverse offerings, Lockheed often has a below-average valuation due to its moderate growth prospects. With the majority of sales originating from the U.S. government, Lockheed's primary customer is unlikely to undergo major budget adjustments unexpectedly.
Investors can anticipate steady growth for Lockheed in the long term, making it a dependable dividend stock. Lockheed recently extended its dividend increase streak for the 22nd time and offers a yield of 2.7%, noticeably higher than the S&P 500's yield of just 1.2%.
Investors concerned about a 2025 market collapse can be reassured by Lockheed's substantial order backlog, permitting it to perform well regardless of economic conditions. Lockheed concluded the quarter ending Sep. 29 with a $166 billion order backlog distributed across its four segments. For reference, Lockheed is forecasting 2024 revenues of $71.25 billion.
All things considered, Lockheed is a secure dividend stock to purchase at an attractive price in 2025.
2. American Water Works
American Water Works, a regulated water utility, supplies drinking water and wastewater services to customers in California, Hawaii, the Midwest, the Mid-Atlantic, and parts of the South. Its business model entails servicing a growing population while collaborating with regulators and government agencies to ensure competitive pricing. American Water Works consistently earns enough revenue to maintain operations and fund infrastructure upgrades.
The core investment strategy revolves around sustainable, robust dividend growth. The company aims for an annual growth rate of 7% to 9% while keeping a payout ratio of 55% to 60%. By maintaining a controlled payout ratio, the company sustains a solid financial position and has surplus funds for reinvestment.
Shares of American Water Works have fallen by approximately 13% in the last three months, pushing its yield back up to 2.5%.
American Water Works might not deliver dazzling growth, but it can perform well regardless of the economy or broader stock market, making it a dependable dividend stock for risk-averse investors to buy in 2025.
3. Kenvue
Consumer healthcare company Kenvue is as unexciting as American Water Works. However, the passive income opportunity for Kenvue investors is anything but dull, offering a yield of 3.8% from the stock.
Noteworthy brands under the Kenvue umbrella include household names such as Aveeno, Band-Aid, Listerine, Neutrogena, and Tylenol. Kenvue's strategy focuses on preserving market leadership of existing brands through consistent volume and price increases over time.
Kenvue separated from Johnson & Johnson in August 2023, inheriting J&J's Dividend King streak. Kenvue's first dividend increase as an independent company came on July 25, as it announced a modest 2.5% increase to the quarterly payout. Although not groundbreaking, Kenvue's current yield is more impressive than that of other consumer staples stocks.
Activist investor Starboard Value obtained a position in Kenvue, believing there's untapped value in its top brands. Although Kenvue's future pace of dividend growth and buybacks remains unclear, Starboard's investment represents a promising sign that Kenvue has hidden potential.
Kenvue is an appealing high-yield stock for income investors. Demand for Kenvue's products should remain relatively steady despite economic conditions, making it an attractive choice for individuals looking to generate dividend income and preserve capital rather than seeking growth.
- Given the market volatility, it might be wise for individuals to consider investing in stable dividend stocks like Lockheed Martin, which has a solid financial position, a diverse portfolio, and a history of increasing dividends.
- In times of uncertainty, a defensive strategy could involve investing in companies with reliable dividends, such as American Water Works. This regulated water utility consistently provides steady revenue and prioritizes dividend growth, offering a secure income source for investors.