As interest rates decline, many income investors are likely pivoting back toward dividend stocks to secure higher yields. However, many dividend stocks underperform the S&P 500 because they're considered slow-growth stalwarts instead of market-beating investments.
Nevertheless, there are still a few blue chip dividend plays that stayed ahead of the S&P 500's 13% gain in 2025. Let's take a look at two of them -- Altria (MO 0.35%) and IBM (IBM 1.53%) -- and see why they beat the market as other dividend stocks lost their luster.
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1. Altria
Altria, the maker of Marlboro, is the largest tobacco company in America. It has raised its dividend every year since it spun off its overseas business as Philip Morris International in 2008, and it currently pays a hefty forward dividend yield of 6.5%.
Altria might seem like a risky investment because adult smoking rates in the U.S. have plunged over the past six decades. But it's offsetting that pressure by raising its prices, expanding its portfolio beyond cigarettes (with snus, nicotine pouches, e-cigarettes, and other smoke-free products), cutting costs, and buying back more shares to boost its EPS.
That's why analysts still expect Altria's adjusted EPS to grow 6% in 2025 and 3% in 2026, even as its revenue growth stays nearly flat in both years. Its projected EPS of $5.60 for 2026 should also easily cover its forward dividend rate of $4.24 per share.
At $65, it still looks like a bargain at 12 times next year's earnings. That low valuation and high yield should limit its downside potential.
Altria's biggest near-term catalyst should be its acquisition of the e-cigarette maker NJOY. It closed that deal in 2023, but it doesn't expect it to become accretive to its EPS until 2026. It expects its entire smoke-free portfolio (which also includes its nicotine pouches) to eventually generate $5 billion in revenues in 2028. That would be equivalent to a quarter of its projected revenues for 2025, and would significantly curb its dependence on traditional cigarettes.
2. IBM
IBM was once considered a dying tech giant that had fallen far behind its industry peers in the cloud, mobile, and AI markets. From 2011 to 2020, Big Blue's revenue plummeted from $106.9 billion to $55.2 billion as its core businesses shrank and it divested its non-core businesses. As it stumbled, it desperately cut costs and repurchased more shares to boost its EPS, but those myopic strategies made it even more difficult to stabilize its revenues.
But under Arvind Krishna, IBM's former cloud chief who took over as its CEO in 2020, the company shrewdly divested its slow-growth infrastructure services unit and focused on expanding its higher-growth hybrid cloud and AI businesses. Instead of going toe to toe against cloud giants like Amazon and Microsoft, IBM focused on developing more open source applications that could be wedged against on-site clouds and public cloud platforms.
That strategy paid off, and IBM's revenue finally grew at a CAGR of 3% from 2021 to 2024. From 2024 to 2026, analysts expect its revenue and adjusted EPS to grow at a CAGR of 5% and 8%, respectively, as it continues to expand its hybrid cloud and AI businesses.
IBM's stock still looks reasonably valued at 23 times forward earnings, and it pays an attractive forward dividend yield of 2.5%. Its projected EPS for $11.94 for 2026 should easily cover its forward dividend rate of $6.72, and it has raised its dividend annually for 30 consecutive years.
Should you buy either of these market-beating dividend stocks?
Altria and IBM outperformed the S&P 500 and many other dividend stocks this year because they have clear catalysts on the horizon. Altria's investments in e-cigarettes and nicotine pouches are stabilizing its business, while IBM's bold expansion of its hybrid cloud and AI services are helping it keep pace with its higher-growth industry peers.
These two blue chip stocks might not outperform the S&P 500 over the long run, but they're both places to park your cash this year if you expect the market to cool off. The S&P 500 already looks historically expensive at 31 times earnings, so it might be smart to buy a few shares of these two boring dividend stocks.
