In this article, we discuss the 10 best defensive dividend stocks for 2025.
According to a McKinsey report dated June 5 this year, consumer spending worldwide is still lagging behind the average at the start of 2020, with persistent inflation continuing to strain budgets. The report indicates a rather interesting trend, which is the declining connection between consumer spending and sentiment. It is difficult to predict how the average consumer will move next, because current trends show them skimping in one retail category, only to extend their budget in others. Patterns in consumer spending, previously attributed to COVID, have now taken root as long-term habits.
McKinsey noted that behavioral changes observed during COVID lockdowns, like relying on digital platforms, staying indoors, and prioritizing convenience, have become part of daily life. While people spend the majority of their free time alone on hobbies, fitness, online shopping, and social media, consumers still report low trust in social media for purchase decisions. Although its consistent presence still shapes their buying behavior and perceptions of brands.
Moreover, Gen Z is becoming the biggest and richest generation, with their spending rising faster than earlier generations. Growing up in a digital world and during COVID-19, Gen Z focuses more on financial success than traditional milestones like marriage or kids. Overall, consumers are also focusing on local and homegrown brands over imported products, in a bid to promote domestic businesses, ensure affordability, and get products that meet their needs more effectively. Due to rising prices, customers now delay their purchases by looking for deals and waiting for sales rather than buying full-priced items.
Meanwhile, NIQ’s Consumer Outlook report from September 29, 2025, shows that while consumers are used to absorbing new market shocks and consistent volatility, spending has become very purposeful to allocate resources properly. Consumers are unable to cater to further price hikes, which is why businesses will need to focus on volume growth over higher prices to maintain a competitive advantage. Additionally, digital shopping experiences are now preferred by customers for an effortless shopping experience.
With that outlook in mind, let’s take a look at the best defensive dividend stocks for 2025.
Image by Steve Buissinne from Pixabay
Our Methodology
For this list, we used a stock screener to identify dividend-paying consumer staples stocks. To narrow the selection, we focused on companies with strong hedge fund interest, consistent dividend records over several years, and healthy financial performance. These firms are better positioned to endure market fluctuations due to their operational scale. We included hedge fund sentiment data for each stock as of Q2 2025, ranking them in ascending order based on the number of hedge fund holders.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10. Keurig Dr Pepper Inc. (NASDAQ:KDP)
Number of Hedge Fund Holders: 46
Dividend Yield as of November 6: 3.44%
Keurig Dr Pepper Inc. (NASDAQ:KDP) is one of the best dividend stocks to buy. KDP’s current momentum is driven by its acquisition of JDE Peet’s (JDEP), a Dutch coffee chain. On October 27, the company announced that it is securing $7 billion from Apollo and KKR to fund the JDEP acquisition. KDP hopes this will appease investor concerns about the company’s excessive debt levels. The deal increases Keurig’s leverage and triples its commitment to a coffee segment investors had sought to minimize, according to TD Cowen analyst Robert Moskow in a note to investors in early October.
On October 29, Jefferies maintained a Buy call on KDP but trimmed the price target from $41 to $39 following “a largely successful” investor meeting where investors finally looked past the flaws on the initial JDEP deal. The deal itself was complicated, as the $7 billion strategic investment substitutes conventional debt with a payment model involving a joint venture and preferred equity. However, Jefferies remains confident that the company’s strategic reasoning and accretion expectations stay intact.
The company has a 5-year history of raising its dividend payouts, and the plans for expansion are not likely to deter its solid shareholder returns. Keurig Dr Pepper Inc. (NASDAQ:KDP) is a multinational beverage company that offers a range of beverages and single-serve brewing systems.
9. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 55
Dividend Yield as of November 6: 2.38%
Dollar General Corporation (NYSE:DG) is one of the best dividend stocks to buy. On October 28, Bernstein analyst Zhihan Ma reiterated a Buy rating on Dollar General, with a price target of $134.
On November 4, in another update independent of the analyst action, Dollar General reported that it has hired Travis Nixon as the Senior Vice President of AI Optimisation. This is a newly minted role that aims to implement artificial intelligence to improve operational efficiency, in addition to optimising merchandising and supply chains. Nixon has had over 10 years of AI and machine learning experience, and he previously worked as the Head of AI at Dropbox. His experience also includes technical roles at Meta and Microsoft.
Regarding Nixon’s appointment, Steve Deckard, Dollar General’s Executive VP of Strategy and Development, commented:
“At a time when our customers rely on us more than ever, we’re excited to welcome Travis and his transformative AI leadership to streamline operations and enhance the experience for Dollar General employees and customers. This new role represents our commitment to driving innovation to unlock value in our operations, making us stronger now and in the future. With greater strategic integration of AI, we look forward to accelerating and expanding existing efforts to drive operational excellence, cost efficiency, and customer-centric innovation.”
Dollar General Corporation (NYSE:DG) is an American discount retailer that offers a wide range of products, including everyday consumables, packaged foods, household items, and apparel.
8. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 66
Dividend Yield as of November 6: 2.99%
Starbucks Corporation (NASDAQ:SBUX) is one of the best dividend stocks to buy. On November 6, Morgan Stanley analyst Brian Harbour maintained a Buy recommendation on Starbucks with a price target of $105. The analyst’s Buy call stems from the company’s recent business initiatives and growth opportunities. The Starbucks brand is known for its in-house coffee experiences, which the company is trying to reinvigorate for customers. The company is also revamping its holiday product range, which is expected to boost sales and increase customer engagement.
Meanwhile, a news piece by Reuters dated November 3 disclosed that SBUX will hand over control of its Chinese unit to a Chinese private equity company, Boyu Capital, for a transaction value of $4 billion.
This agreement suggests that Boyu will own a 60% interest in Starbucks’ Chinese retail operations, while Starbucks will keep a 40% position. Starbucks will also own the intellectual property and branding for the new entity.
Starbucks Corporation (NASDAQ:SBUX) anticipates that its China retail unit will generate a total value of more than $13 billion, including the amount from the sale of its majority interest, the retained interest value of Starbucks, and the long-term licensing earnings expected over the coming decade. This initiative comes as the company manages a debt balance of $27.9 billion alongside short-term liquidity constraints.
Starbucks entered the Chinese coffee scene back in 1999, and although it has made a name for itself, its market share toppled to just 14% last year, which is significantly lower than the 34% market share it had captured in 2019. This is because Chinese coffee players like Luckin sell their drinks at one-third of the Starbucks price, partly because they offer takeaway and delivery, rather than the SBUX business model, which focuses on dine-in coffee experiences.
Jason Yu, General Manager of CTR Market Research, commented regarding the joint venture:
“Boyu is more of a private equity firm, they are probably going to provide more strategic support to Starbucks and also help them with relationships and digital partnerships.”
7. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 68
Dividend Yield as of November 6: 2.21%
The Kroger Co. (NYSE:KR) is one of the best dividend stocks to buy. On November 4, Kroger and Instacart disclosed that they have extended their partnership, with the latter being Kroger’s main end-to-end delivery partner for Kroger.com and the company’s mobile app.
The two companies will offer AI-based shopping solutions to consumers. Kroger will be one of the first companies to provide Instacart’s AI Assistant through the iOS version of its app. The AI Assistant, known as Cart Assistant, allows users to look up meal ideas, prepare shopping baskets, and plan meals on an interactive platform.
The delivery times will be shortened to around 30 minutes for more clients under the Express Delivery option on Kroger’s website. Instacart presently offers delivery from around 2700 Kroger stores under 20-plus banners across the United States.
The Instacart and Kroger partnership commenced back in 2017, and together they have initiated delivery services throughout the country, Express Delivery, and AI-based Caper Carts.
Separately, Kroger also announced that it is expanding its partnership agreement with Uber on October 30. The companies will combine their resources to provide grocery and food delivery solutions to customers. At the start of 2026, customers will be able to tap into the complete range of Kroger’s product offerings from over 2600 outlets via the Uber Eats app. Kroger customers can also access the restaurants listed on Uber Eats within the Kroger app, which means they can essentially add groceries and restaurant orders in a single place. Both businesses will also offer loyalty benefits to their respective customers.
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
Dividend Yield as of November 6: 3.98%
PepsiCo, Inc. (NASDAQ:PEP) is one of the best dividend stocks to buy. On October 23, Freedom Capital Markets downgraded Pepsi to Hold from Buy, while also trimming its price target from $170 to $164. Freedom Capital sees a modest upside potential of 7%.
The rating update came in light of Pepsi’s Q3 fiscal 2025 results, which topped market forecasts for sales and EPS, also leading to a share price rally.
Revenue growth for Pepsi increased compared to the prior quarter, although it still lingers near the low single-digit range. However, the company reiterated its full-year revenue outlook after the earnings release and boosted its EPS growth guidance for FY2025. Moreover, the company has maintained a consistent track record of quarterly dividend payouts since 1965, increasing its dividend for the 53rd consecutive year in 2025.
Independent of the analyst action, PepsiCo, Inc. (NASDAQ:PEP) announced on October 27 that it settled a lawsuit claiming that it misrepresented Gatorade protein bars as healthy, despite them packing more sugar than chocolates and donuts, and the protein component is rather low. A California-based District Judge, Casey Pitts, overruled the proposed class action, citing prejudice. This means that the judge concluded the case with no option for refiling, in response to a request by Pepsi and three fitness enthusiasts who filed the lawsuit.
5. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 84
Dividend Yield as of November 6: 3.00%
The Coca-Cola Company (NYSE:KO) is one of the best dividend stocks to buy. On November 7, BofA maintained a Buy recommendation on KO and lifted the price target from $78 to $80. BofA observed that after Coca-Cola’s Q3 financial results were published on October 21, the company also disclosed its 10-Q, in addition to the 8 publicly listed Coke bottlers’ reports. This offers more transparency into Coca-Cola’s results, especially regarding sales volumes.
The research firm’s team works with 8 of Coca-Cola’s global publicly traded bottlers, and the insights using the bottlers’ reports and the company’s disclosures allow for better analysis of Coca-Cola’s financial performance. The upgraded $80 price target assumes a 25x multiple of Coca-Cola’s projected 2026 earnings.
In other developments, Coca-Cola director Levchin Max R disclosed that he acquired shares of the company worth $998,676 on October 23 and 24, 2025. Levchin purchased 2,864 KO shares on October 23 with a weighted average price of $69.8721, while another 4,197 shares were picked up at an average price of $70.3062. On October 24, the director bought 7,206 units at a weighted average price of $69.8706 per share. Levchin now holds 14,267 shares of Coca-Cola stock.
4. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 88
Dividend Yield as of November 6: 2.90%
The Procter & Gamble Company (NYSE:PG) is one of the best dividend stocks to buy. A Reuters report dated November 3 disclosed a court ruling that Procter & Gamble must respond to claims regarding Kids’ Crest packaging, which misleads parents about how much toothpaste kids should use.
On October 31, Jorge Alonso, the American district judge, ruled that parents could attempt to demonstrate that Procter & Gamble was in breach of state laws and misled consumers through packaging depicting a full toothpaste strip and an American Dental Association (ADA) endorsement.
Procter & Gamble sought dismissal of the lawsuit, pointing out that federal law preempts the plaintiffs’ allegations and that its labeling provides clear dosage instructions. The lawsuit is part of a series of cases filed in January against companies, including Colgate-Palmolive, accused of marketing products with eye-catching, candy-inspired designs.
Attorney Michael Connett, who represents the parents in the case against P&G, noted that four lawsuits are still pending, which is a promising development. Connett said the companies may finally have to answer for their actions.
In a separate update on October 16, The Procter & Gamble Company (NYSE:PG) announced a new share and incentive plan, in addition to the reelection of all nominees for the position of board directors. Shareholders have approved the company’s 2025 Stock and Incentive Compensation Plan, enabling P&G to issue up to 175 million shares for equity-based awards, including stock options and performance units. Remaining shares from the 2019 plan can also be considered under the latest program. Meanwhile, shareholders decided that all director nominees will serve one-year terms, with voting results indicating that each earned at least 1.6 billion affirmative votes.
3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 91
Dividend Yield as of November 6: 0.56%
Costco Wholesale Corporation (NASDAQ:COST) is one of the best dividend stocks to buy. On November 6, Costco announced a comparable sales growth in October of 6.7%, up from 5.7% the prior month. Sales gained momentum despite a 100-basis-point impact linked to last year’s early purchases ahead of Hurricane Helene and port strikes on the East Coast.
Separately, Oppenheimer named Costco as a ‘Top Pick’ on November 3, crediting the retailer’s compelling valuation, robust market standing, and staying power in a softer spending season.
Rupesh Parikh, an Oppenheimer analyst, wrote in an investor note that after the stock’s recent re-rating and with the toughest comps nearly behind it, the firm is adding COST to its top picks again.
Although the stock has dropped about 15% from its February peak, the analyst remarked that the decline further supports the outperformance outlook, driven by Costco’s solid value offering and wealthier customer segment.
The firm trimmed its price target to $1,050 from $1,130, which indicates the re-rating but still includes nearly 15% upside.
According to Oppenheimer, Costco’s valuation has returned to normal levels, with its earnings multiple close to historical averages. Parikh noted that the company is set up nicely for the holiday season due to solid retail activity and a strong product lineup, including Apple products, gift cards, branded apparel, and appliances.
There are potential long-term growth triggers like a stock split or special dividend, but management has not signaled anything on these. In the short term, Oppenheimer recommended that any swings caused by potential food stamp issues during a government shutdown could be leveraged.
2. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 105
Dividend Yield as of November 6: 0.93%
Walmart Inc. (NYSE:WMT) is one of the best dividend stocks to buy. On October 31, Walmart announced that it is rolling out five AI-led shopping options to improve the experience for buyers this holiday season.
The new shopping features will be accessible on both the Walmart mobile app and website. An in-store savings option will enable customers to check local store sales with a click, along with deeper search functions that indicate where the selected items are placed within stores, as well as a wish list feature that arranges the products by aisle for a convenient shopping experience.
Walmart’s digital assistant, Sparky, is now equipped to handle AI-based party planning, and it can generate lists of products required for each occasion. AI-powered audio descriptions of products and product reviews, as well as augmented reality, will be leveraged to allow for interactive retail experiences.
Walmart is one of the most prominent consumer staples players due to its ongoing efforts to integrate technology into its operations. In a separate update, Walmart and Avery Dennison announced on October 22 that they are developing RFID systems for fresh food items in departments including meat, bakery, and deli.
They introduced sensor-based solutions that allow RFID tags to function in refrigerated, moisture-prone environments such as meat sections, resolving a prior technical challenge. This innovation helps Walmart employees track stock levels and oversee digital expiry dates to streamline product turnover and discounting. The collaboration promotes Walmart’s aim to lower food loss and waste across its supply chain by 50% by 2030.
1. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 111
Dividend Yield as of November 6: 4.07%
Philip Morris International Inc. (NYSE:PM) is one of the best dividend stocks to buy. Stifel Nicolaus analyst Matthew Smith reiterated a Buy call on Philip Morris with a $180 price target on November 6.
On November 4, independently of the analyst action, Philip Morris announced that from January 1, 2026 onwards, it will follow a new corporate structure, with the US and International business units being separated as the company grows.
This corporate restructuring will fill in for the 4 geographic business units as of now, with three new segments: International Smoke-Free, International Combustibles, and U.S.
Philip Morris aims to start financial reporting for the new units in Q1 2026, and the prior financials for the years 2023-2025 will be declared after this year’s full results are published. This restructuring supports PM’s broader objective of transitioning into a smoke-free business. Since 2008, it has spent more than $14 billion developing and launching alternatives to traditional cigarettes.
While we acknowledge the potential of PM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than PM and that has 100x upside potential, check out our report about this cheapest AI stock.
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