High Quality Stocks That Pay a Hefty Dividend Are Unlikely to Cut in 2025, According to Ubs

With 2025 off to a rocky start, investors might find quality stocks with dependable dividends increasingly attractive. As market volatility persists, these stocks offer a measure of stability and income, making them a compelling choice for cautious investors.

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The first trading session of the year was marked by turbulence, with all three major U.S. indexes closing lower on Thursday despite early gains. The S&P 500 and Nasdaq Composite both extended their losing streaks to five consecutive sessions—their longest since April—while the Dow Jones Industrial Average recorded its fourth straight decline.

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In this challenging market environment, UBS conducted a screening for high-quality stocks that exhibit strong fundamentals and minimal risk of dividend cuts. According to UBS, the likelihood of a dividend cut across regions and sectors stands at 22.9%, but the U.S. remains the most secure market for dividends, with only a 6.2% probability of reductions. UBS also highlighted that most U.S. sectors appear “relatively safe” for dividend stability.

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Japan emerged as UBS’s top pick for dividend growth, with a forecasted growth rate of 9.9%. By contrast, the Pacific region (excluding Japan) and Europe are expected to see negative dividend growth, making Japan a standout for income-focused investors.

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High-Quality Dividend Stocks Highlighted by UBS

Exxon Mobil

Exxon Mobil features prominently on UBS’s list, boasting a dividend yield of 3.7%. In the third quarter of 2024, the energy giant returned $9.8 billion to shareholders and raised its fourth-quarter dividend to $0.99 per share. These actions underscore Exxon’s commitment to rewarding its investors.

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Wall Street analysts are largely optimistic about Exxon’s prospects. Of the 29 analysts covering the stock, 17 rate it as a strong buy or buy, while 11 suggest holding. Exxon’s average price target of nearly $130 implies a potential upside of approximately 21% from its closing price on Thursday.

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Exxon is also diversifying its business by entering the artificial intelligence (AI) arena. The company recently announced plans to build a natural gas plant to power a data center, positioning itself to meet the growing energy demands of AI technologies.

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While Exxon underperformed the broader market last year, its stock still managed to climb nearly 5% over the past 12 months, reflecting its resilience in a challenging environment.

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McDonald’s

McDonald’s also made UBS’s list, offering a dividend yield of 2.5%. In September, the fast-food giant increased its quarterly dividend by 6% to $1.77 per share, marking 48 consecutive years of dividend growth. The latest dividend was paid out on December 16, 2024.

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Despite a slight 1% decline in its share price over the past year, McDonald’s remains a favorite among analysts. Of the 40 analysts covering the stock, 25 rate it as a strong buy or buy, while 15 have a hold rating. The average price target of around $325 suggests an upside potential of more than 11%.

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On Thursday, McDonald’s shares rose about 1% following the news that Arcos Dorados, a key franchise partner, renewed its 20-year master franchise agreement with the company. Arcos Dorados shares also surged approximately 3% after the announcement, further affirming the strength of McDonald’s franchise model.

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Johnson & Johnson

Johnson & Johnson, another name on UBS’s list, provides a dividend yield of 3.4%. Earlier this week, the healthcare giant declared a dividend of $1.24 per share for the first quarter of 2025. This dividend level was first introduced in April 2024, representing a 4.2% increase from the previous payout of $1.19 per share.

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However, Johnson & Johnson’s stock performance has been under pressure. Over the past 12 months, its shares have declined by more than 10%. Despite this, its reliable dividend payments make it a consistent choice for income-focused investors seeking stability in the healthcare sector.

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The appeal of high-quality dividend stocks becomes evident when market conditions are uncertain. UBS’s focus on stocks with strong fundamentals and secure dividend payouts aligns with the preferences of investors looking for reliable income streams and potential for capital appreciation.

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While the broader market faces challenges, companies like Exxon Mobil, McDonald’s, and Johnson & Johnson offer a combination of stability, growth, and income that can be particularly valuable in times of market turbulence. By focusing on regions and sectors with a strong track record for dividend reliability—such as the U.S. and Japan—investors can better navigate the uncertainties of 2025.

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