Between 2023 and the end of 2024, the S&P 500 (^GSPC -1.11%) gained a staggering 53.2%. The strong two-year performance has left the index with a relatively expensive valuation.
The benefits of dividend stocks can be lost by the sound of a roaring market. But dividends can go a long way when the market is trading sideways or going down. Dividends are a way to book a return without selling stock, which can be helpful when equity prices are falling.
Coca-Cola (KO 0.05%), Unilever (UL 0.76%), and LyondellBasell (LYB 0.05%) all have sizable yields. Investing $2,000 into each stock should help generate $278 in passive income in 2025, assuming all companies keep their payouts at least as high as last year. Here's why all three dividend stocks are worth buying now.
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Coke benefits from global diversification
Coca-Cola is a company that needs no introduction. But what you may not know is the extent of its beverage brand distribution network.
Coke has bottling partners around the globe. These partners help Coke simplify its business and achieve incredibly high operating margins. With a trailing-12-month operating margin of 29.2%, Coke's margins are closer to a company like Apple (31.5% operating margin) than fellow beverage behemoth PepsiCo (14.4% operating margin).
For the nine months ended Sept. 27, 2024 -- Coke's most recently reported quarter -- North America made up less than half of global sales and just 28.7% of operating income. Meaning Coke's international business is now more important than its domestic business.
Outside of flagship Coca-Cola, other notable brands owned by the company include Bodyarmor, Costa Coffee, Dasani, Fanta, Fuze, Gold Peak, Minute Maid, Powerade, Simply, Schweppes, Sprite, and Topo Chico, among others.
Coke has 62 consecutive years of dividend increases, a 3.1% yield, a price-to-earnings (P/E) ratio of 25.6, and a forward P/E of just 20.8 -- a discount to its historical median valuation.
KO PE Ratio data by YCharts
Coke's history of slow and steady growth, the expansion and effective marketing and distribution of its brands, and its ultra-reliable dividend make it a top dividend stock to consider in 2025.
By investing $2,000 in Coke, you can expect to earn about $62 in passive income in 2025.
Unilever is a dirt-cheap dividend stock
Unilever is a consumer packaged goods company with recognizable brands spanning several key categories. Beauty and Wellbeing includes Dove, TRESemme, and Vaseline. Personal Care features Axe, other Dove products like body washes, and more. Home Care features Domestos, Comfort, and others. Nutrition includes Hellmann's and Knorr. Ice Cream features Ben & Jerry's, Magnum, and other brands.
Unilever is a balanced business, with each segment making up between 16% and 22% of product turnover in the company's most recent quarter. However, a big change could be coming later this year as Unilever moves to separate its ice cream segment as a stand-alone business.
Unilever isn't the fastest-growing company, with a multiyear targeted underlying sales growth range of just 3% to 5% per year. However, the company does have solid operating margins of 17.4%, an inexpensive valuation with a P/E ratio of 20 and a forward P/E of just 17.4, and a high yield of 3.4%.
A $2,000 investment in Unilever would earn you about $68 in dividend income this year.
LyondellBasell has fallen far enough
The chemical giant's stock price has been crushed and is now hovering around a four-year low. One look at its operating margins, and it's easy to see why.
LYB Operating Margin (TTM) data by YCharts
Sales are near a three-year low, and margins are at their lowest levels in the last decade. LyondellBasell isn't alone, as fellow commodity chemical giants Dow, BASF, and Celanese, and refiners Valero Energy, Phillips 66, and Marathon Petroleum have also been selling off.
Higher interest rates have been dragging on the broader industry. Higher capital costs can impact manufacturing and heavy industry -- key buyers of LyondellBasell's products. Higher interest rates also make it more expensive for LyondellBasell to take on debt to accelerate growth. However, the company has a solid balance sheet, with leverage ratios such as debt-to-capital and financial debt-to-equity at reasonable levels.
The main concern with investing in LyondellBasell is the reliability of its dividend payment. When the company is in growth mode, the dividend expense isn't as much of a burden. But with the business not at the top of its game, managing an expensive dividend payment is more challenging.
The company sports a whopping 7.4% yield, or $5.36 per share. Trailing-12-month earnings are $6.59 per share. Consensus analyst estimates call for $8.00 in 2025 earnings per share. So, even with earnings down and an inflated yield, the company should still be able to fund its dividend with earnings. However, investors shouldn't expect meaningful dividend raises until the industry recovers.
Based on the current payout, a $2,000 investment in LyondellBasell should earn you $148 in passive income in 2025.
