The S&P 500 Coming from back-to-back years of 20%-plus annual gains For the first time in 25 years. But corporate earnings haven’t grown at the same rate, so many companies have become more expensive. However, there are many opportunities to find quality companies at compelling prices if you know where to look.
It was pegged by three Fool.com contributors 3M (NYSE: MMM), Essential utilities(NYSE: WTRG )And homogenous(NYSE: EQNR ) As excellent Dividend stock To buy in 2025. By investing in equal parts of each stock, you can expect to earn a 3.8% yield — nearly 3 times the S&P 500 yield of 1.2%. Here’s why all three stocks are worth buying in 2025.
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Lee Samaha(3M): With a 2.2% dividend yield, 3M isn’t the dividend stock it used to be. However, investors won’t care too much about this as the stock is up 42% in 2024, after years of underperformance. Additionally, if CEO Bill Brown’s plan to revive the company succeeds, the stock could perform again in 2025.
3M’s poor growth rate over the past decade means there is ample opportunity to improve operational efficiency. This begins with restoring its reputation for innovative new product introductions (NPIs), a key part of Brown’s long-term plans. While investing in research and development, 3M’s management team implemented lean manufacturing techniques, improved the company’s asset utilization, reduced complexity in its supply chain (primarily by consolidating suppliers ), and will be engaged in improving the (OTIF) as a whole from time to time. ) delivery.
These supply chain improvements will lead to significant improvements in cash flow generation because they allow 3M to improve inventory turnover (so there is less need to add cash to holding inventory). Additionally, in the near term, 3M is cutting less profitable product lines (representing about 5% of its consumer sales) and fast-tracking some NPIs into product line extensions.
With the healthcare business (a division that previous management had invested a lot of time and effort into with disappointing results) now operated as a separate company, current senior management has a great opportunity to improve operational performance at 3M. And trading at 16.3 times estimated 2025 earnings, 3M looks like an excellent value opportunity.
Scott Levine (Essential Utilities): From increasing emergency funds to cutting wasteful spending, investors have made all sorts of New Year’s resolutions. A common plan for the new year, for example, is increasing one’s passive income stream. Among the many great dividend stocks available to investors, water utility stock Essential Utilities — with its enticing 3.6% forward dividend yield — is a particularly good opportunity right now, given its cheap valuations.
After boosting its dividend 34 times in the past 33 years, Essential Utilities has demonstrated a strong commitment to returning capital to shareholders. And even the booms aren’t just drops in the bucket. Essential Utilities has grown its dividend at a 7% compound annual growth rate (CAGR) from 2015 to 2024. While the future is impossible to know, it seems likely that future dividend growth is also in store as management projects earnings per share to grow at a CAGR of 5% to 7% from 2025 to 2027. Because the company operates primarily in regulated markets — approximately 99% of earnings come from regulated water and wastewater operations — investors can be confident that the company will achieve management’s expectations.
With Essential Utilities shares changing hands at 12.4 times operating cash flow, a discount to its five-year average cash flow multiple of 17, today looks like a good time to click the buy button on Essential Utilities stock.
Daniel Folber (synonymous): Norwegian energy giant Equinor was the worst performing integrated oil major in 2024.
Equinor and fellow European majors now sport less expensive valuations ExxonMobil And Chevron.
Equinor, in particular, could be much cheaper thanks to its capital return program and changes to renewable energy investments.
For the past three years, Equinor investors have enjoyed regular dividend as well as additional dividend payments. Payouts have been massive — most recently at $2.80 a share in 2024 — representing a yield of more than 10%. At the same time, Equinor has been aggressively repurchasing stock, reducing its share count by 15.6% over the past three years. In total, Equinor will return more than $14 billion to investors through dividends and buybacks in 2024.
Equinor had always made it clear that a capital return program of this scale was not sustainable in the long term. Instead, the company used large profits to pay down debt and return capital to shareholders. But it still plans to return $8 billion to $10 billion to investors in 2025, including about $4 billion to $6 billion in buybacks and a $0.02-per-share common dividend increase. So even without the extra juice from the special dividend, Equinor still sports a 5.5% yield.
Equinor is building its renewable energy portfolio, led by offshore wind. The Norwegian continental shelf is ideally suited for offshore wind projects. Elsewhere, Equinor is involved in leases around the world, including on the US East Coast. On December 23, Equinor completed a 10% stake in the Danish wind giant Orsted. The stake is valued at $2.3 billion, but Equinor paid a weighted average price that is 14.4% higher than the stock’s current price at the time of this writing. Wind will be an integral part in helping Equinor achieve its carbon reduction targets. However, the wind industry has been in a slump, which is likely hurting the near-term investment thesis in Equinor.
Still, the company stands as a balanced energy stock for 2025. Equinor has been exploring and producing oil and gas from the North Sea for decades. It is very profitable and now sports an incredibly healthy balance sheet with more cash and cash equivalents than long-term debt. Valuations and yields are compelling, especially compared to other major companies.
However, investors focused more on oil and gas may want to consider U.S. majors such as ExxonMobil or Chevron, as these companies are capitalizing on expanding their oil and gas production portfolios and lowering average production costs per barrel. . Equinor also continues to invest in new global oil and gas projects, but it does not yet have as attractive onshore acreage.
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Daniel Folber Equinor Asa has positions and the following options: $26 calls on short February 2025 Equinor Asa. Lee Samaha No positions in any of the stocks mentioned. Scott Levin No positions in any of the stocks mentioned. 3M and Chevron have positions and are recommended in The Motley Fool. The Motley Fool recommends BP, Equinor Asa, and Ørsted A/s. Motley Fool has a Disclosure Policy.
