2025 wasn’t the easiest for investors. While having to navigate through the tariff uncertainty, investors also saw major ups and downs in the stock market. It is expected that the market will keep the momentum this year, but you need to be careful when it comes to building a portfolio. Instead of chasing a quick upside, invest in stocks that can stand the test of time.
There are several dividend paying stocks with higher yields, low prices and strong fundamentals. Such stocks create the right setup for an income-focused investor. If you’re looking for the best dividend stocks to buy this year, consider Coca-Cola Co. (NYSE: KO), Chevron Corp. (NYSE: CVX), and Procter & Gamble Co. (NYSE: PG). They also happen to be Buffett’s favorite stocks. Let’s dive deep into them.
Coca-Cola
Warren Buffett’s favorite stock, Coca-Cola has never disappointed income investors. The stock has a yield of 2.84% and has increased dividends for 63 consecutive years.
Coca-Cola has a payout ratio of 67.85% and pays an annual dividend of $2.04 per share. As an investor, one of the most attractive things about the company is the cash flow it generates. The company has nailed the business model and manages to keep the operating expenses at a minimum, thus maintaining a high cash buffer. Exchanging hands for $72, the stock has gained 16% in the past year and is very close to its 52-week high of $74.
It is a steady-growth business with impressive financials. Coca-Cola has a global presence and enjoys strong brand loyalty. The company has a diversified product portfolio that includes energy drinks, fruit juices, bottled water, tea, coffee, alcoholic beverages, and sports drinks. While maintaining an asset-light model, it has kept the operating costs at a minimum and built a presence in over 200 countries.
In the third quarter, it saw a 6% rise in organic sales and a 5% jump in revenue. The EPS soared 30% to $0.86. It ended the quarter with a free cash flow of $2.4 billion. With a 5-year dividend growth rate of 4.46%, KO stock will keep rewarding shareholders for years to come. It is one of the safest dividend gems to own this year.
Chevron Corporation
Oil and gas giant Chevron Corporation is a midstream, upstream, and downstream business. It is an integrated oil company with a solid history, strong fundamentals, and an attractive yield. Chevron has a dividend yield of 4.10% and has raised dividends for 38 consecutive years. It has a payout ratio of 86.01% and pays $6.84 per share in annual dividend.
There are several reasons to like Chevron stock. One, the demand for oil is not going to dip anytime soon. Countries across the world need oil and Chevron has ample growth potential. Despite the volatility in oil prices, Chevron has managed to reward investors. It has an impressive balance sheet that allows the company to take on debt when oil prices dip. With the acquisition of Hess, Chevron has added assets in Bakken shale and Guyana to its portfolio.
No matter how the market moves this year, Chevron is one dividend stock to buy and hold for the next decade. Given its strong presence in the sector and a history of generating steady cash flow, Chevron is a solid buy.
CVX stock is exchanging hands for $166.66 and has gained 6.8% in the past year. The company has an appealing outlook and the ability to stand strong even during oil price declines. UBS has a buy rating on the stock with a price target of $197.
Procter & Gamble
A household name today, Procter & Gamble has a solid presence and enjoys brand loyalty. It owns brands like Pampers, Tide, Crest, and Gillette. Many of its products dominate the consumer goods industry today. The demand for these products might fluctuate, but it is never going to end.
This makes Procter & Gamble a reliable stock to own. It has a dividend yield of 2.82% and has increased dividends for 69 years. It pays an annual dividend of $4.23 per share and has a payout ratio of 60.62%. The company has the ability to raise the payout in the long term.
The stock has performed poorly since November and is down 9.76% in the past year. This is due to the inflation-ridden environment, but it could be a short-term issue. It is a cyclical headwind that could be nearing its end. The company has recently announced second quarter results with a revenue of $22.2 billion and an EPS of $1.88. The net sales saw 1% year-over-year growth, while the organic sales remained unchanged. The company returned $4.8 billion in the form of dividends and share repurchases.
Exchanging hands for $149, it is a buy in the dip. Analysts are confident about the stock and have raised price targets. Wells Fargo has a price target of $165 with an overweight rating while JP Morgan has a price target of $165 and an overweight rating.