Thinking About Buying Dividend Stocks During the 2025 Nasdaq Bear Market? Consider These Risks First.

Last week's rally in the broader stock market indexes sprung the Nasdaq Composite (NASDAQINDEX: ^IXIC) back upward after a more than 20% that technically put it into a bear market. However, it's apparent that market volatility may be far from over.

Income investors looking at the current landscape may be wondering if now is the best time to buy dividend stocks given the wild swings to the upside and the downside. Here are some risks worth considering before buying dividend stocks and why ExxonMobil (NYSE: XOM) is a good example of a dividend stock that you can buy with confidence during a bear market.

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1. Dividend track record

Investors who use dividends for financial planning or to supplement income in retirement will want to target companies with reliable payouts. After all, what good is a dividend if a company cuts it at the slightest sign of economic uncertainty?

ExxonMobil has raised its dividend for 42 consecutive years -- which may come as a surprise given the ups and downs in the oil and gas industry. In the last decade alone, there was the crash of 2014 and 2015 and the plunge during the COVID-19 pandemic. In fact, ExxonMobil reported its worst year on record in 2020 -- a staggering $22.4 billion loss.

Even during a period of high uncertainty and a collapse in the global economy, ExxonMobil kept its dividend streak alive in 2020 because it relied on the strength of its balance sheet.

2. Financial health

ExxonMobil's balance sheet is in its best shape in over a decade.

ExxonMobil's net total long-term debt position is just $14.7 billion, which is small for a company of its size. Its financial debt-to-equity ratio of 0.08 and debt-to-capital ratio of 12.5% showcase how the company has reduced its dependence on debt and can rely on free cash flow to fund operating expenses and long-term investments.

In fact, ExxonMobil has the lowest debt-to-capital ratio of the major integrated U.S. and European oil and gas companies -- a close second being its U.S. peer Chevron.

BP Debt To Capital (Quarterly) data by YCharts

ExxonMobil can support its dividend even if margins fall due to lower oil and gas prices. The company has considerably improved its cost structure and technological advancements that have reduced production costs.

ExxonMobil has a long-term plan through 2030 built around Brent (the international benchmark) crude oil prices averaging $65 per barrel. However, it also has an optimistic scenario at $85 Brent and a pessimistic outcome at $55 per barrel. Even at $55 per barrel, ExxonMobil expects to earn a cash surplus of $110 billion from 2025 to 2030 thanks to higher free cash flow from its acquisition of Pioneer Natural Resources, development of onshore assets in the Permian Basin, production expansion offshore Guyana, and other moves.

Brent crude oil prices averaged $81 per barrel in 2024 but have fallen in recent weeks due to tariff tensions, production increases in the Middle East, and recession fears. Brent crude oil is at a three-year low of around $63.60 at the time of this writing. But again, even at this level, the dividend is manageable -- although ExxonMobil may pull back on near-term capital expenditures if prices stay low.

3. Navigating a slowdown

The third risk worth considering before scooping up shares of dividend stocks during a bear market is whether the company can endure a prolonged slowdown. Or, in this case, tariffs.

Dividend affordability and a strong balance sheet are part of the equation, but so are competitive advantages. ExxonMobil can profit from its oil and gas production portfolio even at lower prices. Unlike some pure-play companies, ExxonMobil isn't dependent on a single geographic region. ExxonMobil also has a massive refining business and a growing low-carbon division. So, in the event of a slowdown, the company should be well positioned to take market share or even pounce on an acquisition opportunity.

Not all dividend-paying companies have ExxonMobil's advantages. Some companies had strained balance sheets heading into 2025. Others have a dividend expense that is already eating up the bulk of profits. So, for these companies, if profits come down and stay down for too long, there could be pressure for a dividend cut.

A high-yield dividend stock with a payout you can count on

Dividends are an excellent way to collect passive income no matter what stock prices are doing -- allowing investors to book a return without having to sell stock. But a dividend is only as reliable as the company paying it.

Despite operating in the cyclical oil and gas industry, ExxonMobil is a beacon of dividend reliability. With a yield of 4%, ExxonMobil is an excellent way to generate a sizable amount of passive income while staying invested in the market.

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Daniel Foelber has positions in Equinor Asa. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends BP and Equinor Asa. The Motley Fool has a disclosure policy.