As top AI stocks take a breather amid valuation and demand concerns, investors are expected to increase their focus on dividend stocks in 2025 for stable income and portfolio diversification. Lord Abbett said in its 2025 outlook report that investors could benefit from high-quality dividend stocks with long histories of dividend growth in 2025. But which dividend stocks should you buy for 2025? Let's take a look at a case study for ideas.
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About two years ago, someone asked r/Dividends – a discussion board for dividend investors on Reddit with over 640,000 members – whether anyone was living off dividends. The post received several responses, with many interesting stories of dividend investors. But one story got our attention.
An investor said he was making about $160,000 in annual dividend income with an average portfolio yield of about 4.3%. He, 72, advised fellow investors to focus on blue chip stocks with dividend growth track record.
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"Best advice: learn and understand utilities. It's the only sector where the government guarantees a profit (regulated utilities). Stick with mostly blue chips," he said.
The investor named a few holdings in his comment and mentioned many others in a separate Reddit post. Let's look at some of the top dividend stocks in his portfolio.
Realty Income
Realty Income Corp O was the biggest position of the investor, who made $160,000 per year in dividends. In a separate Reddit discussion, the investor said he'd been buying O shares when the stock was trading at around $18.
"Only time I ever sold was when it hit 80. I'm retired now and it's my largest position 4,828 shares, unrealized gain of $25k. It will move up when interest rates come down and as they continue to raise dividends," he said.
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Enbridge
Canadian energy pipeline company Enbridge Inc. ENB was among the biggest holdings in the portfolio. According to Benzinga Pro, the stock yields about 6.3%. In early December, the company increased its dividend by 3%.
Starwood Property
Starwood Property Trust Inc. STWD is a Connecticut-based REIT that focuses on commercial mortgage loans and equity investments. Offices, a volatile segment of the industry, account for just 11% of its assets. Commercial and residential lending (69% of assets), infrastructure lending and servicing make up a major chunk of the company's business (69% of assets).
Johnson & Johnson
Johnson & Johnson JNJ was among the portfolio’s top blue-chip dividend stocks. The company has raised its dividends for over six decades. In December, BofA rated Johnson & Johnson as Neutral and set a $166 price target on the stock.
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W.P. Carey
WP Carey Inc. WPC is among the top net lease REITs with over 1,200 properties in the U.S., Europe and other parts of the world. Retail stores, restaurants, automotive companies and grocery stores are among the REIT's tenants.
WEC Energy Group
Electricity and natural gas company WEC Energy WEC was among the key utility dividend stocks in the investor’s portfolio, collecting $160,000 per year in dividends. According to Benzinga Pro, the stock has a dividend yield of about 3.6%.
Iron Mountain
Iron Mountain Inc. IRM is a data storage REIT that provides physical storage solutions for documents and records. Its customers are major businesses with data storage and information management requirements.
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Procter & Gamble
The investor earning $160,000 per year in dividends said he had a big position in Procter & Gamble Co. PG. The company has raised its dividends for 68 consecutive years.
Pembina Pipeline Corporation
According to Benzinga Pro, midstream energy company Pembina Pipeline Corporation (PBA) has a dividend yield of over 5.2%. The stock rose about 7% in 2024.
"Largest utility holding is PBA, which is exempt from Canadian withholding since held in IRA," the investor said during the discussion on Reddit.
American Electric Power Company
Ohio-based American Electric Power Company Inc. AEP was another utility dividend stock in the portfolio. The stock rose about 10% in 2024. In December, Scotiabank downgraded AEP along with a few other utility stocks as the firm did not see an attractive near-term outlook for utility stocks.
Interest Rates Are Falling, But These Yields Aren't Going Anywhere
Lower interest rates mean some investments won't yield what they did in months past, but you don't have to lose those gains. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities.
Arrived Home's Private Credit Fund’s has historically paid an annualized dividend yield of 8.1%*, which provides access to a pool of short-term loans backed by residential real estate. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
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