3 Rock-Solid Dividend Stocks to Buy, Even if There's a Stock Market Sell-Off in 2025

When investors are optimistic, they may be willing to pay a premium price for a stock in the hopes that the company's future earnings grow rapidly. But when investors are pessimistic, or there's an economic downturn, they may prefer to go with companies that are valued based on where they are today instead of their potential.

The benefits of dividend-paying value stocks are displayed when the stock market is selling off. Collecting dividends makes it easier to endure falling equity prices because it takes the pressure off selling a stock at a lower price. However, it's a bad idea to overhaul your investment strategy based on where the market could be headed in the short term.

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Here's why Union Pacific (NYSE: UNP), Watsco (NYSE: WSO), and NextEra Energy (NYSE: NEE) stand out as three dividend stocks worth buying and holding through periods of volatility.

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All aboard this dividend-paying value stock

Daniel Foelber (Union Pacific): Union Pacific rose more than 5% after reporting excellent fourth-quarter and full-year earnings results on Jan. 23. Full-year revenue increased just 1% year over year, but lower operating costs helped the company grow operating income by 7%.

2025 guidance reaffirmed the company's investor day objectives outlined in its September 2024 presentation. The company plans to grow its earnings per share (EPS) at a compound annual rate in the high single to low double digits while also growing its dividend, maintaining a 45% payout ratio, and buying back $4 billion to $5 billion in stock per year.

Union Pacific has arguably one of the best capital return programs out there. While the dividend yield is just 2.3% and the last few dividend raises have been very small, the company is buying back stock at a breakneck pace. In just five years, Union Pacific has decreased its share count by over 12% -- which has helped grow EPS at a decent rate despite sluggish net income growth.

Union Pacific's results can ebb and flow in the short term, as many of its end markets are highly cyclical. However, over time, the company has grown revenue and earnings and expanded margins steadily.

UNP Revenue (Annual) data by YCharts

The company notched 40.1% operating margins in 2024 -- which demonstrates the impeccable profitability of the railroad business model. Railroads play an integral part in efficiently transporting heavy goods, materials, agricultural products, fuels, and more on land. Because the network is already built out, the bulk of costs for companies like Union Pacific go toward network upkeep through operating expenses like fuel and labor.

Revenue can grow over time as the economy expands. So, investing in railroads is a natural bet on sustained U.S. economic growth.

With a reasonable price-to-earnings ratio of 22.4, Union Pacific stands out as a high-quality dividend stock at a good value to buy now.

Watsco can continue to generate stellar returns for investors

Lee Samaha (Watsco): Shares of the air conditioning, heating, and refrigeration parts distributor Watsco have delivered a 341% return for investors over the last decade and a near 500% total return -- assuming investors reinvested their dividends into the stock. The returns are a testament to the attractiveness of Watsco's business model, and I think that holds even in a market sell-off or an economic slowdown.

First, fixing and replacing a spare part in an air conditioning or heating unit isn't usually seen as a discretionary spending decision that can be put aside when the economy is weak. Moreover, the demand for servicing is a function of an installed base of equipment, such as air conditioners, which keeps growing even in a slowdown.

Second, Watsco's business model involves acquiring many smaller distributors and building scale and geographic reach. Once a part of the Watsco network, management can expand the acquired distributors' inventory and provide benefits of scale (including its technological ecosystem that makes it easier for contractors to order parts). Its ecosystem includes e-commerce platforms, detailed product information across 1,500 stock-keeping units, and mobile apps to enable contractors to make orders that customers need quickly.

As such, when the markets are weak, Watsco might be able to acquire smaller distributors at more attractive prices. Sporting a 2.2% dividend yield, Watsco is a great stock to buy on market-led weakness.

NextEra Energy is a high-yield dividend opportunity that can power your passive income stream

Scott Levine (NextEra Energy): While NextEra Energy may not be a household name, it's one experienced income investors will likely recognize. In addition to providing a high-yield dividend, which currently has a 2.8% forward yield, the utility stock also has a strong history of hiking its dividend. This, coupled with management's interest in extending the streak of dividend raises in the coming years and the company's reliable business model, makes the stock a great option for those seeking a defensive pick to provide passive income during a market sell-off.

For three decades, NextEra Energy has boosted its distribution higher. That's no small feat, and while it doesn't mean that the company is guaranteed to raise it continuously for another three decades, it's certainly a good indication that rewarding shareholders is inherent in the company's culture. Plus, while some companies will nudge their payouts only a nominal amount higher each year, NextEra Energy is in the other camp. From 2003 to 2023, NextEra Energy has raised its dividend at a compound annual growth rate of about 10%. Management, moreover, expects to lift the dividend 10% in 2025 and 2026 from the $2.06 in dividends it returned to shareholders in 2024.

The owner of Florida Power and Light Company (FPL), NextEra Energy generates considerable cash flow from its regulated business operations. In 2024 and 2023, for example, FPL accounted for 64% and 73%, respectively, of the company's overall cash from operations. With the company guaranteed certain rates of return on its regulated business operations, it will likely continue to see FPL contribute strong cash flows in the future. And with this foresight into future cash flows, management can plan accordingly for future dividend raises and upgrades to the company's infrastructure.

A market downturn can often be unsettling, but with NextEra Energy stock providing steady passive income, investors can feel a little more secure.

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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy, Union Pacific, and Watsco. The Motley Fool has a disclosure policy.