What should investors be looking for when it comes to choosing the best dividend stocks to buy in 2025?

At Morningstar, we think that the best dividend stocks aren’t simply the highest dividend stocks or the top-performing dividend stocks. We suggest that investors look beyond a stock’s yield and short-term performance and instead choose stocks with durable dividends and buy those stocks when they’re undervalued.

“It’s really critical to be selective when it comes to buying dividend-paying stocks and chasing yield,” explains Dan Lefkovitz, a strategist for Morningstar Indexes. “Looking for the most yield-rich areas of the market can often lead you into troubled areas and dividend traps—companies that have a nice-looking yield that is ultimately unsustainable. You have to screen for dividend durability and reliability going forward.”

David Harrell, the editor of Morningstar DividendInvestor, suggests focusing on companies with management teams that are supportive of their dividend strategies and favoring companies with competitive advantages, or economic moats.

“A moat rating does not guarantee dividends, of course, but we have seen some very strong correlations between economic moats and dividend durability,” Harrell says.

Investors looking for good dividend stocks to buy might consider adding undervalued, quality dividend stocks to their portfolios.

10 best US dividend stocks to buy

To find the best dividend stocks, we turn to the Morningstar Dividend Yield Focus Index. The dividend stocks on this list are among the index’s top constituents, and they also were trading in the 4- and 5-star range as of July 11, 2025.

  1. ExxonMobil XOM
  2. Johnson & Johnson JNJ
  3. Merck MRK
  4. PepsiCo PEP
  5. ConocoPhillips COP
  6. Medtronic MDT
  7. U.S. Bancorp USB
  8. Lockheed Martin LMT
  9. Mondelez International MDLZ
  10. Air Products and Chemicals APD

Here’s a little bit about each cheap dividend stock, along with some key Morningstar metrics. All data is through July 11, 2025.

ExxonMobil

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High
  • Trailing Dividend Yield: 3.40%
  • Industry: Oil and Gas Integrated

ExxonMobil tops our list of the best dividend stocks to buy. Unlike peers that are diverting investment to renewables to achieve long-term carbon intensity reduction targets, ExxonMobil remains committed to oil and gas, explains Morningstar director Allen Good. “While this strategy is unlikely to win praise from environmentally oriented investors, we think it’s more likely to be more successful and probably holds less risk,” he adds. ExxonMobil qualifies as a dividend aristocrat; dividend aristocrats are those companies that have raised their dividends for 25 consecutive years or more. We think ExxonMobil stock is worth $135 per share, and shares trade 14% below that.

Johnson & Johnson

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Low
  • Trailing Dividend Yield: 3.20%
  • Industry: Drug Manufacturers—General

Johnson & Johnson is another dividend aristocrat on our list of undervalued dividend stocks to invest in. The stock is trading about 4% below our fair value estimate of $164 per share. With a diverse revenue base, solid pipeline, and exceptional cash flow, the company earns a wide economic moat rating, says Morningstar director Karen Andersen. Andersen notes that the market is underestimating the company’s solid pipeline. She calls Johnson & Johnson’s dividends (and share repurchases) “about right.”

Merck

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Trailing Dividend Yield: 3.84%
  • Industry: Drug Manufacturers—General

Merck is the second healthcare stock on our list of good dividend stocks to invest in, with its stock trading 25% below our fair value estimate of $111 per share. Shares sagged after Merck announced a decline in Gardasil sales, and Morningstar trimmed its fair value on the stock by 7.5% as a result. Even after the fair value trim, Merck stock looks undervalued. The company’s balance sheet is sound and carries low risk. We expect steady future dividends, supported by a payout ratio of close to 50% relative to adjusted earnings per share, notes Morningstar’s Andersen.

PepsiCo

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Low
  • Trailing Dividend Yield: 4.06%
  • Industry: Beverages—Nonalcoholic

Pepsi is the third dividend aristocrat on this month’s list of top dividend stocks to buy. We think Pepsi stock is worth $162, and shares trade 17% below that. Despite near-term headwinds from consumer belt-tightening in the US and higher supply-chain costs, we think Pepsi remains poised to bolster its competitive standing in beverages and snacks by leveraging marketing and product initiatives, reports Morningstar equity analyst Dan Su. Over the next decade, we expect Pepsi’s payout ratio to remain in the low 70s on average and the dividend payment to grow at a mid-single-digit pace annually, says Su.

ConocoPhillips

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High
  • Trailing Dividend Yield: 3.26%
  • Industry: Oil and Gas E&P

The second energy stock on our list of best dividend stocks to buy, ConocoPhillips stock, trades 14% below our $111 fair value estimate. Morningstar’s Allen Good calls the firm “a compelling option in the energy sector, given its commitment to capital restraint and clear policy on the return of cash to shareholders.” ConocoPhillips ties cash returns to cash flow and is committed to returning 30% of operating cash flow to shareholders, which keeps dividend growth modest but ties excess cash toward repurchases and a variable dividend each year.

Medtronic

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: Medium
  • Trailing Dividend Yield: 3.13%
  • Industry: Medical Devices

A top dividend stock to buy, Medtronic shares trade 20% below our $112 fair value estimate. The largest pure-play medical-device maker is a key partner for its hospital customers, thanks to its diversified product portfolio aimed at a wide range of chronic diseases, Morningstar senior equity analyst Debbie Wang explains. The company aims to return a minimum of 50% of its annual free cash flow to shareholders but has been in the 60% to 70% range in recent years, says Wang. Medtronic is also a dividend aristocrat.

U.S. Bancorp

  • Morningstar Rating: 4 stars 
  • Morningstar Economic Moat Rating: Wide 
  • Morningstar Uncertainty Rating: Medium 
  • Trailing Dividend Yield: 4.24% 
  • Industry: Banks—Regional

U.S. Bancorp is the only name from the financial-services sector on our list of the best dividend stocks to buy—and it’s the highest-yielding stock on our list, too. U.S. Bank is trading 11% below our fair value estimate of $53 per share. The bank is in good financial health and has a history of prudent lending, explains Morningstar analyst Maoyuan Chen. The bank devotes roughly 35% to 45% of earnings to dividend payments, she adds.

Lockheed Martin

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Trailing Dividend Yield: 2.79%
  • Industry: Aerospace and Defense

The only name from the industrials sector on our list of good dividend stocks, Lockheed Martin increased its dividend earlier this year by 5%. As a bet on the defense industry, wide-moat Lockheed is hard to beat, argues Morningstar analyst Nicolas Owens. “Biggest isn’t always best, but Lockheed (and investors) benefit from the sheer scale of its tens of billions of dollars of contracts that provide defined decades-long revenue and profit streams,” he explains. Given the company’s conservatively run balance sheet, stable business model, and strong history of returning capital to shareholders, the dividend will likely remain a priority. We think this top dividend stock is worth $539, and shares trade 13% below that.

Mondelez International

  • Morningstar Rating: 4 stars 
  • Morningstar Economic Moat Rating: Wide 
  • Morningstar Uncertainty Rating: Low 
  • Trailing Dividend Yield: 2.80% 
  • Industry: Confectioners

Mondelez International is one of seven wide-moat companies on our list of the best dividend stocks to buy. “Mondelez has proved unrelenting in its commitment to remove further complexity from its operations by rationalizing its supplier base, parting ways with unprofitable brands, and continuing to upgrade its manufacturing facilities,” argues Morningstar director Erin Lash. We forecast the company will increase its dividend in the high-single-digit range on average through fiscal 2033. We think this top dividend stock is worth $74, and shares trade 9% below that.

Air Products and Chemicals

  • Morningstar Rating: 4 stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Trailing Dividend Yield: 2.44%
  • Industry: Specialty Chemicals

Air Products and Chemicals rounds out this month’s list of the best dividend stocks to buy. This top dividend stock trades 8% below our $318 fair value estimate. Underperforming projects and lowered near-term guidance led us to trim our fair value estimate on the stock in May, says Morningstar analyst Krzysztof Smalec. But the company’s balance sheet is sound, and we think its distributions are appropriate. In fact, Air Products and Chemicals is a dividend aristocrat.

What is the Morningstar Dividend Yield Focus Index?

A subset of the Morningstar US Market Index (which represents 97% of equity market capitalization), the Morningstar Dividend Yield Focus Index tracks the top 75 high-yielding stocks that meet our screening requirements for quality and financial health.

How are the stocks selected for the index? Only securities whose dividends are qualified income are included; real estate investment trusts are tossed out. Companies are then screened for quality using the Morningstar Economic Moat Rating and Morningstar Uncertainty Rating. Specifically, companies must earn a Moat Rating of narrow or wide and an Uncertainty Rating of Low, Medium, or High; companies with Very High or Extreme Uncertainty Ratings are excluded. The index includes a screen for financial health using a distance-to-default measure, which uses market information and accounting data to determine how likely a firm is to default on its liabilities; it is a measure of balance-sheet strength.

The 75 highest-yielding stocks that pass the quality screen are included in the index, and constituents are weighted according to the total dividends paid by the company to investors.

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