In this article, we will be looking at 10 dividend stocks that are underperforming in 2025.
Two months into 2025, the stock market has already taken a massive hit from macroeconomic factors. The new power in the White House has brought about so many changes, influencing the broader market. For instance, the new tariffs proposed earlier by the U.S. President – a 25% increase on imports from Canada and Mexico and an additional 10% on imports from China – have been perceived by analysts to have a substantial impact on the stock market. Also, the advent of new AI models from China is affecting the trading volume and value in the U.S. Some dividend stocks are also getting caught in these giant waves while others are thriving.
The shifting economic conditions, changing investor preferences, and company-specific challenges have strongly impacted the performances of a few dividend-paying companies, making the year 2025 more challenging.
READ ALSO: These 10 Dividend Stocks are Outperforming the Market in 2025
In the market, the cautious stance of the Federal Reserve regarding the rate cuts has kept borrowing costs elevated. It has negatively reflected companies relying heavily on debt to maintain their dividend payouts. Furthermore, with the investors’ focus shifting toward technology and AI, some sectors, like consumer staples and utilities, which were traditionally considered safe investments, are declining in their performance.
At the same time, investors increasingly prioritize companies with strong earnings growth over yield-focused companies. With limited capital flowing into the market and shifting priorities, dividend stocks struggle to justify their payouts.
However, it is essential to remember that despite the broader headwinds, not all dividend stocks have suffered. Some have maintained strong financials, thereby continuing to reward investors. Others face significant challenges, including weak earnings reports, declining free cash flow, or strategic inefficiency. For instance, CNN has reported a slump in the energy sector caused by rising inflation rates and price hikes, which are affecting the earnings of some companies in the industry. Because of such challenges, many dividend companies are reevaluating their dividend policies, causing either a decline in payouts or a reallocation of capital toward growth opportunities to remain competitive.
The biggest question, however, is, “What does this mean for the investors?” The new developments raise concerns and signify the need to evaluate more than just a stock’s yield. Future guidance, sector outlook, and the company’s financial health should be prioritized before making an investment decision. In this regard, this article presents investors with an opportunity to look into the underperforming stocks in 2025. The companies on our list may recover, so their current undervalued price could be seen as an opportunity for income-focused investors.
Let’s look closer at our 10 dividend stocks that have struggled in 2025. Stick with us as we count them down from 10 to 1 and explore the reasons behind their underperformance. The top 5 on our list may surprise you.
Our Methodology
To compile our list of 10 underperforming dividend stocks in 2025, we considered companies with a market cap of $1 billion or more since we wanted to include those companies that are financially strong. Next, we looked for stocks with a negative year-to-date (YTD) return as of February 28, 2025, indicating underperformance. We did not include stocks with a dividend yield of less than 4% since income-focused investors are interested in a dividend yield of 4% or more. Also, to drive the value of our article upwards in terms of information and usefulness, we looked into dividend yield, payout ratio, and the number of hedge funds to create the list.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Xenia Hotels & Resorts, Inc. (NYSE:XHR)
Dividend yield: 4.17%
Ex-Dividend Date: March 31, 2025
Number of Hedge Funds: 17
Headquartered in Orlando, Xenia Hotels & Resorts, Inc. (NYSE:XHR) is a real estate investment trust (REIT) engaged in owning and operating luxury and upper-upscale hotels in key U.S. markets. The company exclusively partners with top-tier brands such as Marriott, Hyatt, and Hilton and maximizes its long-term revenue growth by focusing on high-demand urban and resort destinations. The company’s properties are in the South Atlantic, West South Central, Pacific, and Mountain regions.
As of the end of February 2025, Xenia Hotels & Resorts, Inc. (NYSE:XHR)’s year-to-date returns reflected a -9.19% decrease. In addition to the consumer spending shifts and rising operational costs in the U.S., the company faced problems with its renovations, causing a decline in value. The renovation of the Grand Hyatt Scottsdale Resort was expected to generate high earnings. However, the impact of Hurricane Milton caused the company to revise its guidance downwards, resulting in a negative outlook during 2024. However, EPS for the fourth quarter stood at $0.39, surpassing the previous year’s $0.07 and the anticipated $0.38. The company repurchased over 500,000 shares of common stock in the fourth quarter, and the renovations are expected to increase the company’s revenue. Both this commitment to stakeholders and anticipated future growth from renovations may positively affect the company’s value.
Xenia Hotels & Resorts, Inc. (NYSE:XHR) offers a 4.17% dividend yield. However, the payout ratio stands at 320%, signaling unsustainability. Institutional interest in stock remains moderate, as represented by 17 hedge funds from the Insider Monkey database holding stakes in the company, as of Q4 2024.
Analysts remain optimistic, with a 22.40% upside of $16.50, providing a Buy rating. Investors purchasing stocks before March 31, 2025, will be eligible for an April 15, 2025, dividend payout.
9. Marriott Vacations Worldwide Corporation (NYSE:VAC)
Dividend yield: 4.19%
Ex-Dividend Date: March 5, 2025
Number of Hedge Funds: 28
Marriott Vacations Worldwide Corporation (NYSE:VAC) is a U.S.-based company developing, marketing, selling, and managing vacation ownership and related products. The company used to be part of Marriott International but now operates independently from Florida. Currently, the company operates resorts and serves owners and members across North America, the Caribbean, Europe, and Asia-Pacific.
Year-to-date return of the company, ending February 28, 2025, saw a downward trend of -16.13%. The business impact of the Maui wildfires from 2023 was huge and still impacts the company’s performance. Additionally, the lower exchange revenue at Interval International further contributes to the decline year-to-date. Marriott Vacations Worldwide Corporation (NYSE:VAC)’s EPS for the fourth quarter stood at $1.86, beating the anticipated value of $1.51 but still behind the previous year’s value of $1.88. However, with a 7% increase in contract sales in the fourth quarter and plans for new developments, including a Marriott Vacation Club in Thailand, additional units in Bali, and the first Hyatt Vacation Club in Orlando, the company gains a positive outlook among the analysts.
Marriott Vacations Worldwide Corporation (NYSE:VAC) offers a 4.19% dividend yield. The 54.72% payout ratio indicates a healthy balance between earnings used for dividend payments and earnings retained for reinvestments or meeting debt obligations. Backed by 28 hedge funds from the Insider Monkey’s database in Q4 2024, the stock remains attractive for income and growth investors.
Analysts maintain a Buy rating, anticipating a 29.32% upside to $97 from the current price as of March 4, 2025. Investors looking to benefit from the next dividend payment can purchase shares before March 5, 2025.
