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With the New Year upon us, it is an opportune time for investors to reassess their portfolios for 2025. The S&P 500 Index wrapped up another strong year, registering a more than 23% return.

The good news is that there are still undervalued stocks with strong dividends to choose from despite the market’s strong performance in 2024. 

The following 3 stocks have high dividend yields above 3% and total expected returns above 10%, making them among our top picks for the New Year in 2025.

Dividend Stocks for the New Year in 2025

Stanley Black & Decker (SWK)

Stanley Black & Decker is a world leader in power tools, hand tools, and related items. The company holds the top global position in tools and storage sales. Stanley Black & Decker is second in the world in commercial electronic security and engineered fastening. The company is one of just ~54 Dividend Kings. It is our first favorite dividend stock for the New Year in 2025.

On October 29th, 2024, Stanley Black & Decker reported third-quarter results for the period ending September 30th, 2024. Revenue declined 5.1% for the quarter to $3.75 billion, which was $50 million below estimates. Adjusted earnings-per-share of $1.22 compared favorably to $1.05 in the prior year and was $0.17 better than expected. 

Going forward, we expect approximately 8% annual EPS growth for SWK. Cost cuts will be a key factor behind its future earnings growth. In the most recent quarter, its adjusted gross margin expanded by 290 basis points to 30.5%, largely due to supply chain transformation. 

The company’s cost reduction program remains on track to deliver $2 billion in pre-tax savings by 2025. Since starting the program, Stanley Black & Decker has achieved $1.4 billion in cost savings. Inventory has been reduced by more than $2 billion since mid-2022. 

Stanley Black & Decker’s key competitive advantage is that its products are well-known and respected by customers. This was why the company has been able to increase prices in certain product categories over the years and not see a decline in sales. Stanley Black & Decker has also actively made strategic acquisitions to help grow the company.

On July 25th, 2024, Stanley Black & Decker announced it was raising its quarterly dividend by 1.2% to $0.82, extending its dividend growth streak to 57 consecutive years.

SWK stock yields 4.0%. Total returns could exceed 11% per year over the next five years.

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Source: Portfolio Insight*

Hormel Foods (HRL)

Hormel Foods is a juggernaut in the food products industry with nearly $10 billion in annual revenue. It has an extensive portfolio of category-leading brands. Just a few of its top brands include include Skippy, SPAM, Applegate, Justin’s, and more than 30 others. Hormel is the second of our favorite dividend stocks for the New Year in 2025.

It has also pursued acquisitions to drive growth. For example, in 2021, Hormel acquired the Planters snack nuts business from Kraft-Heinz (KHC) for $3.35 billion, boosting Hormel’s growth.

Hormel Foods Corporation reported strong Q3 fiscal 2024 results, with net sales of $2.9 billion and adjusted operating income of $267 million, exceeding expectations.

Key drivers included strong performances in retail brands and international markets, supported by ongoing improvements from the company’s modernization initiatives. The company posted diluted earnings per share of $0.32 ($0.37 adjusted) and a cash flow from operations of $218 million.

Relatively consistent results have come from a steady stream of acquisitions and a bit of organic growth. This has afforded Hormel the ability to raise its dividend consistently as well. We are forecasting forward earnings growth of 5% annually as Hormel could grow more slowly than in the past. 

We see sales growth as the primary driver of earnings-per-share expansion moving forward. Hormel will likely continue to buy growth, and the Planters acquisition is yet another example.

Hormel’s main competitive advantage is its ~40 products that are either #1 or #2 in their category. Hormel has proven brands, and that leadership position is difficult for competitors to supplant. In addition, Hormel has a global network of distributors that few food companies can rival.

HRL has increased its dividend for 58 years. Total returns are expected to reach 13.7% annualized over the next five years.

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Source: Portfolio Insight

Eversource Energy (ES)

Eversource Energy is a diversified holding company with subsidiaries that provide regulated electric, gas, and water distribution services in the Northeast U.S. The company’s utilities serve more than 4 million customers after acquiring NStar’s Massachusetts utilities in 2012, Aquarion in 2017, and Columbia Gas in 2020. Eversource is our third top dividend stock for the New Year in 2025.

On November 4th, 2024, Eversource Energy released its third-quarter 2024 results. For the quarter, the company reported a net loss of $(118.1) million, a sharp decline from earnings of $339.7 million in the same quarter of last year, which reflects the impact of the company’s exit from offshore wind investments. 

Earnings from the Electric Transmission segment increased to $174.9 million, up from $160.3 million in the prior year, primarily due to a higher level of investment in Eversource’s electric transmission system, which is necessary to address system capacity growth and deliver clean energy resources for the region. Earnings from the Electric Distribution segment totaled $203.5 million, up from $173.3 million in the prior-year quarter, driven by base distribution rate increases and continued investments in infrastructure.

The company’s earnings-per-share growth ambition remains at a pace of 5% to 7% compound annual rate from 2023 through 2028, which is consistent with its dividend growth expectations. The company has a good earnings track record and will benefit from rate hikes, transmission investments, and clean energy initiatives, and a greater rate base.

The company has a long history of paying dividends and has increased its payout for 26 consecutive years. The company has a long history of paying dividends and has increased its payout for 26 consecutive years. In February 2024, the quarterly dividend increased by 5.9% from $0.6750 to $0.7150 per share. Over the last five years, the average annual dividend growth rate has been 6.0%. Eversource’s target for yearly dividend growth is 5% to 7%. 

ES total returns could reach nearly 20% per year over the next five years.

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Source: Portfolio Insight*

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