3 Dividend-Paying Value Stocks to Buy Even If There's a Stock Market Sell-Off in 2025

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Investors worried about a stock market sell-off may feel the urge to sell out of their positions and run for the exits. But long-term investors know that it's a mistake to overhaul your investing strategy based on emotion.

A better approach is to ensure you are invested in companies that suit your risk tolerance and can help you achieve your investment objectives. Dividend stocks are a great way to generate passive income without the need to sell out of a position.

Particularly safe options include companies like Lockheed Martin (NYSE: LMT), American Water Works (NYSE: AWK), and Kenvue (NYSE: KVUE), which have recession-resistant business models and emphasize dividend raises. Here's why all three dividend stocks are worth buying in 2025.

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1. Lockheed Martin

After its stock price reached an all-time high earlier this year, Lockheed Martin and its defense contractor peers have sold off considerably over the last few months, possibly due to valuation concerns. Lockheed's price-to-earnings (P/E) ratio is now back down to 17.6 -- right around its 10-year median P/E of 17.9.

Despite a broad portfolio of segments spanning aeronautics, missiles and fire control, rotary and mission systems, and space (mainly satellites), Lockheed Martin tends to have a relatively low valuation because of its mediocre growth prospects. With the vast majority of sales going to the U.S. government, Lockheed's top customer is unlikely to make sweeping changes to the defense budget overnight.

However, investors can pencil in slow and steady growth for Lockheed over time, making it a reliable dividend stock. Lockheed just raised its dividend for the 22nd consecutive year and features a yield of 2.7% -- which is considerably higher than the S&P 500's yield of just 1.2%.

Investors worried about a stock market sell-off in 2025 can rest easy knowing that Lockheed has an extensive order backlog and can do well no matter what the economic situation might be. Lockheed finished the quarter ended Sept. 29 with a $166 billion order backlog spread across its four segments. For context, Lockheed is guiding for 2024 sales of $71.25 billion.

Add it all up, and Lockheed is a safe dividend stock at a good value to buy in 2025.

2. American Water Works

The regulated water utility provides drinking water and wastewater services to customers in California, Hawaii, the Midwest, the Mid-Atlantic, and parts of the South. The business model is fairly straightforward. American Water Works delivers essential services to a growing population and works with regulators and government agencies to set prices so customers aren't overcharged. Still, American Water Works earns enough to maintain operations and invest in new infrastructure.

The investment thesis is centered around a growing, healthy dividend. The company targets an annual growth rate of 7% to 9% per year while keeping a payout ratio of 55% to 60%. By keeping a lid on its payout ratio, the company maintains a healthy balance sheet and still has money left over to reinvest in the business.

Shares of American Water Works have sold off about 13% in the past three months, bringing the yield back up to 2.5%.

American Water Works isn't the type of company that will gush growth. Still, it can do well no matter what the economy or broader stock market are doing, making it a reliable dividend stock to buy in 2025 for risk-averse investors.

3. Kenvue

Consumer healthcare company Kenvue is about as boring as American Water Works. However, nothing is boring about the passive income opportunity for Kenvue investors, who can get a 3.8% yield from the stock.

The company's brands include recognizable names like Aveeno, Band-Aid, Listerine, Neutrogena, and Tylenol. There's not a lot of new innovation at Kenvue; rather, the idea is to maintain industry leadership of existing brands to foster moderate volume and price increases over time.

Kenvue spun off from Johnson & Johnson in August 2023, inheriting J&J's Dividend King streak. Kenvue's first dividend raise as an independent company came on July 25, when it announced a modest 2.5% increase to the quarterly payout. It's not sizable by any means, but Kenvue already has a high yield, even compared to other consumer staples stocks.

Activist investor Starboard Value acquired a stake in Kenvue, believing there's value to unlock from its top brands. It remains to be seen if Kenvue will enter a faster pace of dividend growth and buybacks in the future. But Starboard's stake is an encouraging sign that Kenvue has more potential than meets the eye.

Kenvue is a high-yield stock worth buying for passive income investors. Demand for Kenvue's products should hold fairly steady no matter what the economy is doing, making it a good choice for folks focused on dividend income and capital preservation rather than capital appreciation.

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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue. The Motley Fool recommends Johnson & Johnson and Lockheed Martin and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.