The Best Dividend Stocks to Buy in May 2025: High-Yield Opportunities with Strong Fundamentals

As markets navigate shifting economic winds, dividend stocks remain a cornerstone for income-seeking investors. This May, select companies are offering compelling yields backed by robust fundamentals, strategic growth catalysts, and sustainable payout ratios. Let’s dissect the top picks and understand why they stand out.

Ultra-High-Yield Picks: Balancing Risk and Reward

1. Pfizer (PFE)
With a 7.46% dividend yield, Pfizer leads this category. Its forward P/E of 7.6—27% below its five-year average—hints at undervaluation. The biopharma giant’s revenue surged 52% from 2020 to 2024, driven by its oncology division after acquiring Seagen. A 20% payout ratio and 5x dividend coverage ratio (net income vs. dividends) underscore its financial strength.

Why buy now? Pfizer’s diversified pipeline, including cancer therapies and mRNA innovations, positions it to weather market volatility. Its balance sheet, bolstered by $31 billion in cash, adds further resilience.

2. Verizon Communications (VZ)
Offering a 6.39% yield, Verizon benefits from its telecom dominance. With 5G expansion and a 13.7% year-over-year rise in broadband connections, its cash flow remains predictable. Debt has been slashed by $13 billion since 2022, lowering its payout ratio to 34%.

Key risk? While its low churn rates and cost-cutting efforts are positives, rising regulatory scrutiny in the telecom space could pressure valuations.

3. PennantPark Floating Rate Capital (PFLT)
At a staggering 12.04% yield, this business development company leverages the Fed’s high-rate environment. Its portfolio holds first-lien secured debt with a weighted average yield of 10.6%, minimizing default risk. Traded at a 10% discount to book value as of late 2024, it offers asymmetric upside.

Caveat: While its 98% first-lien portfolio is a safety net, macroeconomic downturns could strain middle-market borrowers.

Top 5 Dividend Stocks to Buy in May

For investors seeking a balance of yield, valuation, and growth, these picks meet strict criteria:

1. Regions Financial (RF)
2. Yield: 4.89% | Upside: 24.88%

3. A post-2015 turnaround story, with optimized risk management and 10% annual loan growth. Its 48% payout ratio leaves room for hikes.

4. Target (TGT)

5. Yield: 4.65% | Upside: 41.83%

6. A consumer staples stalwart, though supply chain risks linger. Its 50.6% payout ratio remains sustainable.

7. AMCR (Amcor Plc)

8. Yield: 5.27% | Sector: Packaging

9. Benefits from global sustainability trends, with contracts tied to food and pharmaceutical industries.

10. Stanley Black & Decker (SWK)

11. Yield: 5.32% | Sector: Industrial Tools

12. Diversified exposure to housing and infrastructure projects, with a 57% payout ratio.

13. Chevron (CVX)

14. Yield: 4.42% | Sector: Energy
15. A Dividend Aristocrat with a 36% payout ratio, capitalizing on oil’s cyclical demand.

Dividend Aristocrats: Long-Term Stability

These S&P 500 members have raised dividends for 25+ consecutive years:

• Franklin Resources (BEN): 7.03% yield in financial services, with a 31% payout ratio.
• Realty Income (O): 5.96% yield from its 10,000+ leased properties, 96% occupied.
• T. Rowe Price (TROW): 5.84% yield in asset management, benefiting from inflows into passive funds.

Conclusion: Prioritize Sustainability and Catalysts

May’s top dividend stocks offer a mix of high yield and defensive traits. Pfizer (PFE) and Verizon (VZ) are clear winners, combining low payout ratios (<50%) with secular growth. For risk-tolerant investors, PFLT’s 12% yield is enticing but demands close monitoring of credit quality.

The Top 5 picks (RF, TGT, etc.) balance valuation and upside, while Dividend Aristocrats like BEN and O provide stability. Key metrics to watch:

• Payout ratios <50%: Ensures dividends won’t strain earnings (e.g., PFE’s 20%, VZ’s 34%).
• Sector resilience: Energy (CVX), telecom (VZ), and healthcare (PFE) dominate due to inelastic demand.
• Catalysts: Pfizer’s oncology pipeline, Verizon’s 5G rollout, and Target’s e-commerce pivot.

Final note: Always cross-reference with Q1 2025 earnings reports and geopolitical risks like trade tariffs or commodity price swings. For income investors, this May’s picks offer a rare blend of yield, safety, and growth—if chosen wisely.

Data as of May 2025. Past performance does not guarantee future results.