This article will look into 2025’s 10 underperforming dividend stocks.
Consistent returns from dividend stocks have long attracted many investors, becoming the cornerstone of many investment portfolios. However, significant changes have been recorded a month and a half into 2025 among these dividend stocks. Some of the most historically reliable dividend-paying companies have struggled to maintain attractiveness. As the market concentrates heavily on innovation and growth, the performances of many of the dividend stocks have begun to decline. The list in this article contains significant stocks, some of which may also be in your portfolio.
Are you curious to find out which? Stick around as we count from 10 to 1 and uncover the names falling behind this year.
Reasons matter as much as knowing the performance level of stocks. The reallocation of capital is a significant reason for the underperformance. Heavy investments have always favored sectors with high-growth potentials, such as artificial intelligence (AI) and technology space, as of 2025. Funds are being pulled from traditional dividend-paying industries like utilities, consumer staples, and real estate investment trusts (REITs) to invest in these sectors. Though major tech companies have been struggling recently, with the advent of DeepSeek–a Chinese AI model–their anticipated growth trajectories continue to be more than that of many dividend stocks. These changes in the market have consequentially depressed the performance of dividend-heavy sectors.
Even with these yield-wise underperformances, dividend stocks have become more attractive. When funds are pulled to invest in high-growth AI stocks, dividend stocks become undervalued, resulting in higher dividend yields. Investors who prefer consistent income are taking this opportunity to acquire quality dividend stocks at favorable valuations. This trend has provided a balancing effect for some sectors.
AI can be a significant reason for the underperformance of the stocks on our list, but it cannot be the sole reason. In our article, we will also look at other factors that led to the underperformance of these 10 dividend stocks. Interest rates, for instance, are among the vulnerabilities of many dividend-heavy sectors like utilities and REITs. With the Federal Reserve continuing to maintain higher interest rates, the attractiveness of dividend stocks may decline further compared to their income-generating counterparts. On the other hand, many tech giants make dividend payments, closing the gap between high growth and income investing. The entry of more AI-driven companies into the dividend-paying territory might cause some of the existing dividend stocks to lose their footing in the competition.
As of now, dividend-paying assets hold value for investors seeking stability and income, particularly regarding market volatility. A deflated AI bubble could potentially uplift the performances of dividend stocks in the future. Hence, understanding the factors contributing to their underperformance becomes necessary to make informed decisions about portfolios in 2025. Our list of 10 underperforming dividend stocks and the reasons behind their declining performance would assist in acquiring such understanding.
Photo by Sharon McCutcheon on Unsplash
Our Methodology:
Our list was put together by considering the negative year-to-date (YTD) returns generated by the companies as of February 15, 2025. We have included the stocks with a minimum dividend yield of 3%, which the income-focused investors would find attractive. Part of our selection also involved taking into account only those stocks with an average daily trading volume of more than 1 million units per day and a market capitalization of more than 500 million USD. These criteria helped select the prominent dividend-paying stocks, identified through their financial performance, trading activity, and market size. They put together the following list of 10 underperforming dividend stocks in 2025. The stocks are ranked according to their dividend yields.
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10. Veritex Holdings, Inc. (NASDAQ:VBTX)
Dividend yield: 3.01%
Dividend payout ratio: 41.03%
Ex-Dividend Date: February 14, 2025
Number of Hedge Funds: 27
Veritex Holdings, Inc. (NASDAQ:VBTX) saw a year-to-date decline of 2.14% on February 15, 2025, underperforming the broader market. In the fourth quarter of 2024, Veritex reported earnings per share of $0.45, missing the consensus estimate of $0.55. The company’s revenue stood at $96.1 million, falling short of the projection of $112.22 million.
The decline raises concerns regarding the ability of the company to sustain long-term profitability in the banking environment, which holds an intense level of competition. With limited product differentiation, the competitors have begun using AI to gain a competitive edge. Competitors like Wells Fargo have integrated AI into their business operations, such as customer service, making their stocks look more appealing. The current strategic initiatives of Veritex Holdings, Inc. (NASDAQ:VBTX) do not include any AI-based solutions, preventing them from tapping into the investors’ segment for AI.
The company provides a dividend yield of 3.01%. The modest payout ratio of 41.03% balances create returns for shareholders and retain capital for future investments. The ex-dividend date for the next payout was February 14, 2025.
Veritex Holdings, Inc. (NASDAQ:VBTX) faces headwinds since they are yet to leverage AI-driven solutions. Still, their dividend stability and 27 hedge funds reflecting moderate institutional confidence suggest the possibility of recovery in the long run.
9. Lockheed Martin Corporation (NYSE:LMT)
Dividend yield: 3.12%
Dividend payout ratio: 57.33%
Ex-Dividend Date: March 3, 2025
Number of Hedge Funds: 58
Lockheed Martin Corporation (NYSE:LMT) – an American defense and aerospace manufacturer, experienced a 12.91% decline in its share price year-to-date on February 15, 2025, after an insider selling of $13 Million.
The company has been underperforming in the past year. Sales of Lockheed Martin Corporation (NYSE:LMT) took a massive hit after the delays in the funding and authorization of F-35 fighter jets. These jets were among the most expensive defense programs in the U.S. They were also the biggest revenue generator for Lockheed. The program contributes to 30% of the company’s total revenue. As a result, the delay in the program affects the company’s revenue stream, causing the insiders to sell $13 Million worth of shares. The delays were caused by a software issue that is expected to continue into 2026. These lags have inevitably led to a decline in hedge fund holdings.
Despite the declining share value, Lockheed Martin Corporation (NYSE:LMT) offers close to 58% of its earnings as dividends, with a dividend yield ratio of 3.12%. The company’s R&D, particularly its F35 jets, has attracted the market’s attention. Investors concentrating on long-term stable income may find the stock appealing.
