Top Dividend Stock to Buy in 2025, and 1 to Avoid

As we approach 2025, investors are seeking stable and reliable income sources. Dividend stocks have long been a popular choice for generating consistent returns. With numerous options available, it's essential to evaluate each stock's potential and risks. In this article, we will discuss the top dividend stock to buy in 2025 and one to avoid, based on current data and trends.



Top Dividend Stock to Buy in 2025: Enterprise Products Partners (EPD)

Enterprise Products Partners (EPD) is a midstream energy company that operates pipelines, natural gas processing facilities, and more. With a forward dividend yield of 6.59%, EPD offers an attractive income opportunity for investors. The company has increased its distribution for an impressive 26 consecutive years, demonstrating a strong commitment to returning capital to shareholders.

EPD's business model focuses on securing long-term contracts with upstream drilling companies, predominantly fixed fee. This aspect minimizes the effects of inflation and spot price volatility in underlying energy commodities, leading to highly predictable operating cash flow year after year. This predictability allows EPD to increase its distribution consistently, making it an attractive choice for long-term dividend growth investors.



EPD's strong balance sheet and history of double-digit percentage returns on invested capital further support its long-term dividend growth prospects. The company's ability to generate stable, predictable cash flow, combined with its commitment to returning capital to shareholders, makes it an excellent choice for investors seeking a top dividend stock in 2025.

Dividend Stock to Avoid in 2025: Ares Capital (ARCC)

While Ares Capital (ARCC) offers an attractive forward dividend yield of 8.65%, there are several risks and challenges that could impact its dividend payout in 2025. As a business development company (BDC), ARCC borrows money to lend to middle-market businesses. This business model exposes the company to interest rate risk, credit risk, liquidity risk, regulatory risk, and market risk.

If the Federal Reserve continues to raise interest rates to combat inflation in 2025, ARCC's borrowing costs could increase, negatively impacting its net interest margin and earnings. A slowdown in the economy or a recession could lead to higher default rates among ARCC's borrowers, resulting in higher loan losses and reduced earnings. Changes in regulations specific to BDCs could also negatively impact ARCC's business model and financial health, potentially leading to a reduction in its dividend payout.



Given these risks and challenges, investors should be cautious when considering Ares Capital as a dividend stock in 2025. While the company has a strong track record of dividend growth, the potential risks and uncertainties make it a less attractive choice compared to other dividend stocks, such as Enterprise Products Partners.

In conclusion, investors seeking top dividend stocks in 2025 should consider Enterprise Products Partners (EPD) as an attractive income opportunity. EPD's strong business model, consistent dividend growth, and stable cash flow make it an excellent choice for long-term dividend growth investors. On the other hand, Ares Capital (ARCC) presents several risks and challenges that could impact its dividend payout in 2025, making it a less attractive choice compared to other dividend stocks. As always, investors should conduct thorough research and consider their individual financial circumstances before making any investment decisions.