We recently published an article titled These 10 Dividend Stocks are Underperforming in 2025. In this article, we are going to take a look at where American Assets Trust, Inc. (NYSE:AAT) stands against the other underperforming dividend stocks.

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.

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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).

Aerial shot of a modern skyline with REIT building projects in downtown.

American Assets Trust, Inc. (NYSE:AAT)

Dividend yield: 6.06%

Ex-Dividend Date: March 6, 2025

Number of Hedge Funds: 16

Headquartered in San Diego, American Assets Trust, Inc. (NYSE:AAT) is a real estate investment trust (REIT) specializing in owning, operating, acquiring, and developing high-quality retail, office, and residential properties. The company distinguishes itself from its competitors by focusing on prime urban and coastal markets. The company uses long-term ownership strategies to maintain substantial asset value and rental growth.

By February 28, 2025, the company's year-to-date return had declined to 14.58%. The unfavorable economic environment and interest rate fluctuations led to the company's underperformance. The sale of Del Monte Shopping Center for $123.5 million, a prominent asset of the company, was seen as a sign of the company's financial distress. The EPS of $0.15 during the company's fourth quarter surpassed the anticipated $0.14. American Assets Trust, Inc. (NYSE:AAT) has no debt maturity till 2027, thus gaining financial stability between 2025 and 2026. This recent performance may be causing a positive outlook for the company.

American Assets Trust, Inc. (NYSE:AAT) presents a 6.06% dividend yield. However, the payout ratio of 142.55% raises concerns regarding the sustainability of the payouts. The stocks are part of 16 hedge fund portfolios listed in Insider Monkey's Q4 2024 database, marking a moderate institutional interest.

The stock has a Hold rating from analysts. 16.28% upside to $26 offers some potential, but caution may be required. Interested investors can purchase stocks before March 6, 2025, to benefit from the next dividend payout.

Overall AAT ranks 4th on our list of the dividend stocks that are underperforming in 2025. While we acknowledge the potential of AAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AAT but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. This article is originally published at Insider Monkey.

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