Despite finishing up more than 23% higher for the second year in a row, the S&P 500 has been weighed down by sell-offs amid thin volume trading as investors take profits before the new year. For many investors, that means selling their holdings and waiting for better opportunities. For me, this is a “buy-the-dip” moment, making it an ideal time to invest in discounted dividend stocks.
It's funny how stocks are the only thing the masses buy when prices are high and avoid when prices are depressed. Yet, we’re all happy to snag Black Friday deals on big-ticket items that start to depreciate the moment you load them in your car.
Today, I’ll have a look at the top dividend stocks for 2025 to add to your portfolio, which are currently trading at a discount.
How I Came Up With The Following Stocks
First, let’s begin with showing you how I performed this analysis.
- Market Cap: $200 billion and above. I wanted to limit my results to mega-cap stocks for: financial strength, market presence, stable cash flow, and reliable dividends.
- 14-day Relative Strength Index: 40% and below. RSI is a technical analysis metric that identifies if a stock is overbought or oversold based on its trading data over a specific period over a 100-point scale. 30 and under represents the oversold margin, while 70 and over, represents overbought. I used 40 and below to identify mega-cap stocks either oversold or close to oversold that have experienced statistically significant sell-offs over the last 14 days. By the way, I used the default 14-day because it’s a good balance for responsiveness (moderately fast and fewer false signals).
- Current Analyst Rating & Number of Analysts: 3.5 (Moderate Buy) to 5 (Strong Buy) and 16 and above, respectively. This set of filters allows me to screen for stocks well-covered by Wall Street analysts and still have buy recommendations on average despite (or maybe because of) their latest sell-off.
- Annual Dividend Yield: 3% or more.
After clicking on “See Results,” I got four hits:
I arranged the results from lowest to highest 14-day RSI and will now discuss three of the four results. For diversification reasons, I elected not to include Chevron on this list, as I already had another oil stock higher up on the list. But, if, for some reason, you don’t like Exxon, then Chevron can serve as an alternative.
In any case, let’s dive into these top dividend stocks, starting with the one with the lowest RSI:
Exxon Mobil (XOM)
14-day RSI: 33.68%
Kicking off the list is Exxon Mobil, a major international energy company primarily involved in the exploration, production, refining, and marketing of oil, natural gas, and petroleum products. Exxon is known for its extensive global operations and offers services through gasoline stations, lubricants, and energy production under its Exxon, Mobil, Esso, and XTO brands.
Exxon currently pays 99 cents in quarterly dividends. Annually, that’s $3.96 a year and reflects a 3.69% yield. The company has increased its dividends for 42 consecutive years, making it a Dividend Aristocrat and in the running for Dividend King. XOM stock has been a little choppy over the past year, peaking at $126.34 a few months ago and now trading under $110.
Still, analyst consensus indicates a moderate buy recommendation with a high target price of $147.00.
Pepsico (PEP)
14-day RSI: 31.68%
Next is Pepsico, the global food and beverage company best known for its Pepsi soft drinks product line. Unlike its primary competitor, the Coca-Cola Company, Pepsico offers a more diversified portfolio of products, including the popular Mountain Dew drinks, the Lay’s and Dorito’s snack line, Quaker and Gatorade, and more.
PEP stock has not had a great year; the recent revenue miss and Robert F. Kennedy (a staunch critic of processed food) being the prime pick for Trump’s Health and Human Services Secretary have led the stock to a fresh 52-week low.
Still, as I see it, the world most likely won’t stop drinking cola, making these developments an opportunity to buy this Dividend King at a discount. Similarly, analysts have not ruled out Pepsico making a comeback, rating PEP stock a moderate buy, with a $200 high target price. The company also pays a $5.42 annualized dividend, translating to a 3.61% yield.
Johnson & Johnson (JNJ)
14-day RSI: 35.83%
Last on this list is Johnson & Johnson, a well-diversified healthcare company that offers an extensive product portfolio ranging from therapeutic pharmaceuticals, prescription drugs, medical devices, and others like skincare and baby products.
JNJ’s stock performance has been rocky this year, recently with a 52-week low of $142.75 on Dec 20, 2024. Indeed, investors are waiting for its Q4 and FY2024 report, expected to be released on January 22, 2025. While analyst scores are a mix of buys and holds, its average score is a moderate buy.
If you want to head off the earnings report and buy JNJ stock now, you can expect to collect $4.96 a year in dividends, which reflects a 3.44% yield—though this Dividend King typically increases its payouts around May, so you can expect the rate to go up by mid-year.
Final Thoughts
These top dividend stocks are trading at deep discounts, so you might want to add them to your portfolio. However, certain developments over the next few months might impact these companies in the short term. And, while these top choices look good on paper now, always watch the news for new developments and do your due diligence.
