Hey friends, I’m back! Today, I want to share with you the three major types of dividend stocks that I’m buying right now in 2025. There are three distinct categories that I focus on in my dividend investing journey, and for each category, I’ll share an example. Two of these stocks are ones I currently own, while the third is on my watch list, ready to be added to my portfolio soon. Let’s get started!
DIVIDEND STOCK CATEGORY 1: CORE "RIDE OR DIE" BLUE CHIPS
The first category of dividend stocks in my portfolio consists of my core "ride or die" blue chips. These stocks are the backbone of my dividend investing strategy. They are anchor positions that provide stability, allowing me to sleep well at night. They offer a strong history of dividend payments and moderate growth, making them ideal for long-term investing.
Why I Invest in Core Dividend Stocks
Stable and reliable – These companies have been around for decades and tend to perform consistently well.
Dividend growth – They increase their dividends over time, boosting my yield on cost.
Dollar-cost averaging (DCA) – I regularly buy shares, even at different price points, knowing that over time, they will grow in value.
Reinvesting dividends – With these stocks, I prefer to reinvest dividends in perpetuity to maximize compounding.
Example: Coca-Cola (KO)
Coca-Cola is a perfect example of a core, ride-or-die dividend stock. I’ve held KO since 2011, when I started buying shares at $31.19 per share. Over time, the stock has appreciated in value and continues to provide a steady dividend.
Key Highlights from Coca-Cola’s 2024 Performance:
Net revenues grew 6% for the quarter and 3% for the full year.
Organic revenue grew 14% for the quarter and 12% for the full year.
EPS non-GAAP grew 12% in Q4 and 7% for the year.
Free cash flow grew 11% year-over-year, which is a strong performance for a consumer staples company.
This is an example of getting rich slowly. It may take years, even decades, but the power of compounding and dividend reinvestment makes Coca-Cola a great long-term investment.
DIVIDEND STOCK CATEGORY 2: HIGH-YIELD STOCKS
The second category in my portfolio consists of high-yield dividend stocks. These are riskier investments compared to blue-chip stocks but offer significantly higher dividend payouts.
Why I Invest in High-Yield Stocks
Higher starting yield – These stocks provide substantial dividend income right from the start.
Require careful entry points – Due to their riskier nature, I only buy these when they are at a deep discount with a margin of safety.
Non-reinvestment strategy – Unlike core stocks, I do not automatically reinvest dividends here. Instead, I take the cash flow to either de-risk my portfolio or use it for other investments.
Example: British American Tobacco (BTI)
BTI is a classic high-yield dividend stock. It carries a bit more risk due to regulatory scrutiny in the tobacco industry, but it has continued to provide stable cash flow.
Key Highlights from BTI’s Recent Earnings:
Organic revenue growth: 1.3% at constant currency.
New categories grew: 8.9%, which is positive for future growth.
EPS growth: 3.6% (adjusted, organic).
Dividend growth: Only 2%, reflecting slow but steady performance.
I bought most of my shares in the $33 range, locking in a 9% dividend yield. Despite recent stock price fluctuations, I remain ahead due to my margin of safety. BTI now makes up 5.29% of my portfolio and contributes 11.47% of my total dividend income.
This is not a stock I expect to appreciate much in value. Instead, I rely on its high dividend yield to generate immediate cash flow. Over time, I aim to recover my entire initial investment through dividends alone, making the remaining shares “house money.”
DIVIDEND STOCK CATEGORY 3: TRUE HIGH-GROWTH DIVIDEND STOCKS
The third category consists of high-growth dividend stocks. These are companies that are expanding rapidly and reinvesting their earnings into future growth. While they tend to have lower initial dividend yields, they make up for it with high dividend growth rates and capital appreciation.
Why I Invest in High-Growth Dividend Stocks
Longer time horizon – These stocks require patience, as the meaningful dividends come in later years.
Total return potential – While dividends start small, stock price appreciation adds to overall returns.
Compounding effect – Dividend reinvestment becomes more powerful as payouts grow over time.
Example: Equinix (EQIX)
Equinix is a real estate investment trust (REIT) that specializes in data centers, making it a prime beneficiary of the AI revolution and cloud computing growth.
Key Highlights from Equinix’s 2024 Performance:
22 consecutive years of quarterly revenue growth.
Annual revenues up 8% (normalized and constant currency basis).
AFFO (adjusted funds from operations) up 10%.
Dividend increased by 10%.
While Equinix currently offers only a 2% dividend yield, its high growth rates make it an attractive long-term investment. It trades at a 25x AFFO multiple, which is on the expensive side, but its steady revenue and earnings growth justify the valuation.
I plan to initiate a position in EQIX soon, once I’ve built up my allocation in SCHD and Alphabet (GOOGL). While it’s challenging to time these high-growth stocks, I believe Equinix has a competitive moat in the data center industry that will sustain its growth for decades.
Final Thoughts on My Dividend Investing Strategy for 2025
To summarize, I am investing in three major types of dividend stocks in 2025:
Core Blue Chips (e.g., Coca-Cola) – Reliable, steady dividend growth stocks that provide long-term stability.
High-Yield Stocks (e.g., British American Tobacco) – Riskier stocks with higher yields, requiring careful entry points.
High-Growth Dividend Stocks (e.g., Equinix) – Lower initial yields but strong growth potential and capital appreciation.
My investment strategy is continuously evolving, and as my portfolio matures, I plan to allocate more capital into high-growth dividend stocks to balance my cash flow needs with future returns.
If you enjoyed this blog, please share your thoughts in the comments below! Do you own any of these stocks? Are you investing in different categories of dividend stocks in 2025? Let’s discuss!
Disclosure and Disclaimer:
I currently own Alphabet (GOOGL), Coca-Cola (KO), British American Tobacco (BTI), Pfizer (PFE), and the SCHD ETF. Equinix (EQIX) is on my watch list. This article is for informational and entertainment purposes only and does not constitute financial advice. Please consult a licensed financial advisor before making investment decisions.
Thanks for reading, and happy investing!