Title: Boost Your Passive Income in 2025 with This ETF and Two Reliable Dividend Stocks
Dive into the world of investing with this tantalizing two-year stretch, where the S&P 500 soared by an astounding 53.2%. Investments in dividend stocks may not have boasted the same gains, but they certainly held their own, offering a stark contrast to the broader market's rollercoaster ride.
Instead of chasing the elusive red-hot rally, invest wisely in balanced companies that have the potential to grow earnings and subsequently, their payouts to shareholders over time. When the market takes a break, investing in dividend stocks or dividend-paying ETFs becomes a game-changer, supplementing income during retirement or providing a cash reserve for reinvestment.
Let's delve into three exceptional companies that will leave you grinning from ear to ear in 2025.
Honeywell International: Time for a Smile
Honeywell is a multibox champion, with thriving businesses in aerospace, industrial automation, and energy efficiency, to name a few. Its reasonable valuation with a 26.2 P/E ratio and a forward P/E of 20.6, paired with its impressive dividend growth, makes Honeywell an alluring buy.
Sporting a respectable 2% yield, Honeywell's dividend growth has outpaced the S&P 500 and the Vanguard Industrials ETF, its industrial sector counterpart, for an impressive 14 years running.
Yet, Honeywell hasn't always been a high-flyer in terms of earnings growth. Despite striving for synergy between industrial equipment and software, Honeywell has struggled to show meaningful earnings impact. Revenue tumbled in the past decade, while EPS only managed a modest increase.
To bolster growth, Honeywell has taken to acquisitions, but these deals have added to its debt load, making its balance sheet more encumbered. Dominant figures in the industry are considering breaking apart, and Honeywell is no exception. Rumors of spinning off its aerospace segment swirl, which could potentially unlock value by boosting innovation.
American Electric Power: A Dividend Crown Jewel on Sale
American Electric Power is a jewel in the dividend crown, offering an impressive yield of over 4%. Its long-standing reputation of rewarding investors with constant payouts spans an impressive 114 years.
Management's steadfast commitment to dividend growth has been mirrored with a commendable 5.8% compound annual growth rate over the last decade. Their dedication to modest payout ratios fills shareholders with confidence, ensuring the company remains financially sound for years to come.
Maintaining its position in regulated markets, American Electric Power can rest assured in steady earnings growth, aiding its high-yield dividend strategy. Additionally, soaring interest in artificial intelligence has opened up new revenue streams through data center power usage, setting the stage for encouraging commercial sales.
Energy Select Sector SPDR Fund: The Perfect Polyfilla
Energy prices have enjoyed a resurgence, with oil clocking in above $70 per barrel. The positive effect of this fueled cash flow for oil companies, allowing them to lavish investors with healthy dividend payouts.
The Energy Select Sector SPDR Fund is no exception, boasting a tastefully tempting 3.3% dividend yield. This low-cost ETF is brimming with 22 oil companies, including the heavyweights ExxonMobil, Chevron, and ConocoPhillips. With such a diverse portfolio, investors can unwind without having to worry about overexposure to a single stock.
However, straddling the fence on oil prices is tricky. Predicting their direction can be challenging due to geopolitical dynamics and policy fluctuation. But if you have faith in oil, this ETF is a fabulous option for dividend-seeking investors.
To preserve your retirement savings and secure a steady income stream, consider investing in dividend-paying companies or ETFs like American Electric Power or the Energy Select Sector SPDR Fund. These financial instruments can provide a reliable source of income, especially during market downturns when other investments may not perform as well.
Investing in dividend stocks, such as Honeywell International, can be a wise choice for those seeking long-term growth. Despite its past challenges, Honeywell's impressive dividend growth and reasonable valuation make it an alluring buy for investors seeking stable returns, a testament to the potential benefits of dividend investing in the world of finance and money.
