2 Dividend Stocks to Double Up On Right Now

In a volatile market, dividend-paying stocks can offer investors a sense of stability. Beyond generating passive income, companies with a track record of increasing dividends often take a disciplined approach to capital allocation, which can help them navigate economic uncertainty more effectively. Research from S&P Global further supports this, showing that companies with a consistent, growing dividend history tend to deliver stronger returns with lower volatility -- an appealing combination for investors.

Considering these advantages, let's explore a few dividend-paying stocks that could be valuable additions to your portfolio.

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1. AerCap

Airlines haven't always been the best investment for investors, but aircraft leasing company AerCap (NYSE: AER) has been a clear exception. As the industry's top player with a market capitalization of $19 billion, it has seen its stock more than double over the past three years, outperforming the S&P 500 by nearly 80%.

AerCap has announced an increase in its quarterly dividend to $0.27 per share for 2025, up from the initial $0.25 per share introduced in 2024. This adjustment brings the company's annual yield to 1.1%.

One key factor to consider when evaluating dividend stocks is the payout ratio -- the portion of earnings allocated to dividends -- to ensure the company can sustain its payouts. Generally, a healthy payout ratio is below 75%, giving management flexibility in allocating capital. Based on management's 2025 guidance of $8.50 to $9.50 adjusted earnings per share (EPS), AerCap will have a healthy payout ratio of between 11% and 13% for the year.

In addition to the dividend, AerCap management is repurchasing the company's stock hand over fist. In 2024, it repurchased $1.6 billion of its outstanding shares, lowering its share count by 7.8% to 186.8 million. Over the past three years, management has repurchased 24% of its outstanding shares.

Furthermore, it recently announced a new $1 billion share repurchase program, meaning shareholders can realistically expect the practice to continue. CEO Aengus Kelly recently noted the company's share repurchases "further underlining the significant value we see in AerCap stock today and our confidence in the outlook for 2025 and beyond."

Why does that matter for investors? Share count and ownership stake have an inverse relationship, meaning that as a company's outstanding shares decline, investor interest increases.

AER Shares Outstanding data by YCharts

As for the stock's valuation, AerCap is currently trading near a three-year high price-to-book ratio of 1.1, indicating it is priced slightly above the company's assets. However, given management's shareholder-friendly approach to capital allocation and positive outlook, the premium isn't outrageous for long-term focused investors.

AER Price to Book Value data by YCharts

2. Caterpillar

Caterpillar (NYSE: CAT), the world's largest construction equipment manufacturer, has paid a dividend for 92 consecutive years and raised it annually over the last 31 years. Today, Caterpillar pays a quarterly dividend of $1.41 per share, equating to an annual yield of 1.66% and payout ratio of 24.5%.

Similar to AerCap, management allocates a significant portion of its earnings to share repurchases. Over the past three years, Caterpillar's outstanding shares have declined by 10.4%.

Management has stated that it intends to continue spending "substantially all" of its machinery, energy, and transportation (ME&T) free cash flow on both shareholder-friendly practices in the future. Notably, in 2024, Caterpillar generated $9.4 billion in ME&T free cash flow but went even further, returning $10.3 billion to shareholders through dividends and share repurchases.

CAT Shares Outstanding data by YCharts

Beyond management's capital allocation, Caterpillar's sales dipped slightly in 2024, totaling $64.8 billion compared to $67.1 billion in 2023. In the latest quarter, management attributed the decline to lower sales volume -- an expected fluctuation as industries move through their natural business cycles, such as a recent slowdown in the oil and gas segment.

As for 2025, Caterpillar management guided for another year of sales declines in 2025, but expects its ME&T free cash flow to be at the top end of its annual $5 billion to $10 billion range.

One potential risk for Caterpillar is the ongoing uncertainty surrounding tariffs, as the Trump administration continues to shift its stance on trade policies. This unpredictability may cause concern among investors, but CEO Jim Umpleby remains confident in the company's positioning. "We are a global manufacturer, but our largest manufacturing presence is in the United States, and we are a net exporter outside of the U.S. That positions us pretty well against many other companies out there," Umpleby said. With a strong domestic footprint and export advantage, Caterpillar appears well equipped to navigate tariff-related challenges.

Finally, looking at Caterpillar's valuation, the stock trades at a three-year low when it comes to its price to free cash flow at 19.3, suggesting the stock could be undervalued.

CAT Price to Free Cash Flow data by YCharts

Are these two dividend stocks worth adding to your portfolio?

Although these companies operate in different industries, they share key similarities: Both are navigating a slowdown in sales growth in the near term. Yet they remain highly profitable, and their stocks trade at reasonable valuations.

More importantly for income seekers, both management teams appear committed to paying and growing their dividends. And that becomes much more feasible when they're able to reduce their share count and maintain a low payout ratio. That makes these two dividend stocks absolutely worth owning for the long term.

Collin Brantmeyer has positions in AerCap and Caterpillar. The Motley Fool has positions in and recommends S&P Global. The Motley Fool recommends AerCap and recommends the following options: long January 2027 $60 calls on AerCap. The Motley Fool has a disclosure policy.