Dividend Stocks Worth Considering in a Volatile Market
Adam Parker, founder of Trivariate Research, suggests that investors looking for more stability might want to explore specific dividend stocks. The market has experienced quite a bit of ups and downs this year, particularly with the Dow Jones, S&P 500, and Nasdaq all showing gains on a recent Monday, rebounding after a sell-off due to worries over Israeli airstrikes on Iran. Parker notes that recent conversations with institutional investors indicate a positive outlook for the S&P, yet he often receives inquiries about solid defensive stocks.
Parker pointed out in a memo dated June 8 that the conventional wisdom around “old-school” defensive stocks—think consumer staples, pharmaceuticals, and telecoms—seems outdated. He believes there are alternative ways for investors to safeguard their portfolios. “I think companies that have consistent dividend growth are likely to provide a solid defense, especially when concerns about growth arise,” Parker wrote. He highlighted that their research over the past five years shows that companies growing dividends, along with sales expansion of at least 7% and forecast revenue growth of 10%, are promising candidates.
Some of the stocks Parker mentions include Microsoft, which recently reclaimed its title as the world’s largest company by market cap. Its dividend yield stands at 0.70%, and the stock reached a record close of $467.68 on June 5, continuing to climb to $478.87 by Thursday, with a peak of $480.69 earlier this week. According to Factset, Microsoft’s stock has a favorable analyst rating and a target price increase of around 8%, alongside roughly 14% annual growth.
Eli Lilly is notable in the pharmaceuticals sector, boasting a dividend yield of 0.73% and achieving a 5% increase this year. The company recently reported stronger-than-expected first-quarter revenues but reduced its profit guidance due to expenses related to cancer treatments. CEO Dave Ricks mentioned that their weight loss and diabetes drug market is significantly larger than currently realized, with around 10 million Americans using their GLP-1 products.
If investors are after higher dividends, Philip Morris International might be appealing. The company currently offers a yield of 2.93%. Its smoking alternatives, especially the Zyn oral nicotine pouch, have been gaining popularity, contributing to a stock increase of over 50% this year. Analysts generally rate this stock positively, with an upward target price forecast.
In the utilities space, dividends are often a strong suit, but only Nextera Energy made it onto this list. It has a yield of 3.03%, reflective of an estimated 3% annual increase. Nextera’s stock also enjoys an average rating and is projected to grow by about 11%.
Finally, Eaton appears well-positioned to capitalize on the surge in demand for artificial intelligence data centers as companies look to return operations to the U.S. The firm also supplies power management solutions to data centers and the aerospace industry. Recently, it announced plans to acquire Ultra PCS for $1.55 billion, a move expected to bolster its standing in the aerospace market. Eaton’s current dividend yield is 1.29%, with a year-on-year increase of 2%, and it has a favorable prospect of up nearly 4% based on average price targets.
