Three Robust Dividend Stocks Worth Investing in Despite a Potential Stock Market Slump in 2025
In the kickoff of 2025, equity markets have seen some wild swings. Some investors might worry about valuations being stretched thin, following two years of solid gains in the S&P 500. But panic shouldn't lead you to drastically alter your investment strategy. Instead, consider investing in companies and exchange-traded funds (ETFs) that can weather a market sell-off and keep or boost their dividends.
Three of Our Website contributors suggest three options: ExxonMobil (XOM 0.90%), Illinois Tool Works (ITW 0.18%), and the JPMorgan Equity Premium Income ETF (JEPI 0.43%). Here's why they are worth considering, even in a challenging market climate.
Stable Growth with ExxonMobil
Global markets have been on a roll, with the S&P 500 soaring over 23% in 2024. However, some investors may be skeptical of an extended market surge in 2025. If you're in that camp, ExxonMobil, with its steady 3.6% forward dividend yield, can be a smart choice to fortify your passive income stream.
With a 42-year streak of dividend increases (even during market downturns), ExxonMobil is a reliable dividend payer to help anchor your portfolio during a sell-off. Plus, the company has a strong track record of averaging a 86% payout ratio and maintaining consistent free cash flow per share.
Over the next few years, ExxonMobil anticipates steady earnings and operating cash flow growth. It projects compound annual growth rates of 10% and 8% from 2024 to 2030, in part due to increased production from its Permian Basin assets.
A resilient player in the energy industry, ExxonMobil is a standout among oil dividend stocks, and should continue this position years to come.
Built to Last with Illinois Tool Works
At first glance, ITW might not seem like an attractive investment during a market sell-off. However, its diversity is one of its strengths. ITW is a conglomerate company with exposure to several industries, including automotive, food processing, and testing and measurement devices.
Diversification is essential, especially during market turbulence. ITW's high operating margins and segment-specific contributions help the broader business weather downturns without relying heavily on any single sector.
As a Dividend King, ITW has increased its dividend for 53 consecutive years. Its recent increase, a 7% hike in 2024, and consistent dividend increases in the last five years (6.5% to 7.4%) provide a stable income stream.
While not the cheapest option in terms of P/E ratio, ITW's quality dividend makes it an attractive investment during uncertain market conditions.
JPMorgan Equity Premium Income ETF for Passive Income Seekers
Investors seeking a relatively safe way to generate passive income during a market downturn might find the JP Morgan Equity Premium Income ETF (JEPI) appealing.
The ETF provides an attractive 7.3% yield by investing in equities and equity-linked notes that sell monthly call options linked to the S&P 500 index. This strategy allows the ETF to generate income when the S&P 500 performs moderately or even declines.
In the event of a sell-off, the JPMorgan Equity Premium Income ETF should perform relatively well, continuing to generate monthly income for investors. The ETF's call options strategy insulates it from potential losses in the S&P 500, making it a smart choice for risk-averse investors.
In light of the market volatility, some investors might consider diversifying their portfolio by investing in companies that can maintain their dividends, such as ExxonMobil, which boasts a steady 3.6% forward dividend yield. With a strong track record of dividend increases, even during market downturns, ExxonMobil's reliability can help anchor your portfolio during a sell-off.
Despite appearing unattractive during a market sell-off, Illinois Tool Works, with its diversified business across various industries, can provide stability. As a Dividend King with a 53-year streak of dividend increases, ITW offers a dependable income stream, making it a solid choice for investors seeking passive income in a challenging market climate.
