With a $2,000 investment in Coca-Cola and a strategic choice of two high-yield dividend stocks, you could potentially generate around $278 in passive income by 2025.
In the foreseeable future, between 2023 and the close of 2024, the S&P 500 (^GSPC 1.04%) saw a spectacular rise of 53.2%. This extraordinary two-year performance has resulted in a relatively expensive valuation for the index.
When the market is roaring, the benefits of dividend stocks can often be overlooked. However, dividends prove invaluable during periods of sideways trading or market downturns. Dividends allow investors to reap returns without selling their stocks, and this can be particularly advantageous when equity prices are declining.
Three promising dividend stocks with impressive yields include Coca-Cola (KO 1.15%), Unilever (UL -5.38%), and LyondellBasell (LYB 0.46%). Investing $2,000 in each stock should result in over $278 in passive income in 2025, assuming that all companies maintain or surpass their dividend payouts from the previous year. Let's delve deeper into why these dividend stocks are worth considering in 2025.
Coca-Cola: A Global Phenomenon
Coca-Cola is a globally recognized beverage brand with an impressive distribution network. The company boasts a plethora of bottling partners worldwide, which helps to simplify its operations and achieve remarkable operating margins. In fact, Coke's trailing-12-month operating margin of 29.2% is comparable to that of tech giant Apple's (31.5% operating margin).
For the ninth quarter ended in September 2024, North America accounted for less than half of total global sales, and its contribution to operating income was only 28.7%. This demonstrates that Coca-Cola's international business has become increasingly vital to the company's revenue and profits.
Other notable brands in Coca-Cola's portfolio include Bodyarmor, Costa Coffee, Dasani, Fanta, Fuze, Gold Peak, Minute Maid, Powerade, Simply, Schweppes, Sprite, and Topo Chico, among others. Coca-Cola has managed to increase its dividend for an incredible 62 consecutive years, providing investors with a 3.1% yield. The stock has a P/E ratio of 25.6 and a forward P/E of 20.8, making it a reasonably priced investment in comparison to its historical median valuation.
The company's slow and steady growth, effective marketing, and reliable dividend make it a top choice for dividend investors in 2025. Investing $2,000 in Coca-Cola could generate approximately $62 in passive income during that year.
Unilever: A Bargain in Disguise
Unilever is a consumer packaged goods company with widely recognized brands in various categories, such as Beauty and Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. The company's product turnover is well-balanced, with each segment contributing between 16% and 22% of the company's total sales in its most recent quarter.
Unilever is expected to separate its ice cream segment as a stand-alone business later in the year. Despite not being the fastest-growing company, Unilever maintains solid operating margins of 17.4%, a P/E ratio of 20, and a forward P/E of only 17.4. Moreover, Unilever offers a high yield of 3.4%.
Investing $2,000 in Unilever would yield around $68 in dividend income for 2025.
LyondellBasell: Valued Too Low?
LyondellBasell's stock price has experienced a significant drop and is currently hovering near a four-year low. Higher interest rates have negatively impacted the broader industry, causing manufacturing and heavy industry costs to rise.
However, LyondellBasell has a solid balance sheet, with reasonable debt-to-capital and financial debt-to-equity ratios. Investors may be concerned about the reliability of the dividend payment in the current market conditions, especially when the company is not at its peak performance.
LyondellBasell currently boasts a staggering 7.4% dividend yield, or $5.36 per share. Even with earnings falling and a high dividend yield, the company should still have sufficient earnings to maintain its dividend payments. In 2025, a $2,000 investment in LyondellBasell could produce nearly $148 in passive income.
- During market downturns or periods of sideways trading, the dividends from stocks like Coca-Cola, Unilever, and LyondellBasell can provide significant returns for investors, as they allow for passive income without selling shares, particularly when equity prices are falling.
- In the future, investing $2,000 in each of these dividend stocks could result in a notable amount of passive income. For instance, in 2025, investing in Coca-Cola could generate approximately $62 in dividends, while investing in Unilever could yield around $68. LyondellBasell, with its high dividend yield, could potentially produce nearly $148 in passive income that year.
- The finance sector has taken notice of Coca-Cola's impressive trajectory, including its strong distribution network and remarkable operating margins, which have helped the company maintain its status as a top choice for dividend investors.
- In the face of market volatility or uncertain financial trends in 2024, dividend-paying stocks like Coca-Cola, Unilever, and LyondellBasell can serve as reliable investment options, offering stable returns through the steady payment of dividends and potential for capital appreciation.
