Volatility has boosted dividend stocks. These are one firm's favorites

Market Volatility Increases Appeal of Dividend Stocks: Top Picks for Steady Investor Income

Think of investing like riding a roller coaster: sometimes the ups and downs are exciting, but when things get too wild, you want something steady to hold onto. That’s where dividend-paying stocks come in—they can help smooth out the bumps in a rocky market.

Why Dividend Stocks Matter Now

This year, the stock market has been swinging up and down. The S&P 500, which tracks big U.S. companies, has dropped about 2% in 2026. Part of the reason is the war in Iran, which pushed oil prices higher. Worries about how artificial intelligence might change companies have also made investors nervous.

Because of all this uncertainty, many investors are looking for companies that are less likely to get hurt by these problems. These are often called “HALO” stocks—companies with heavy assets and low chances of becoming outdated. Many of these companies pay steady dividends, which means they give a part of their profits to shareholders regularly. This makes them feel like a safe place to invest when things get rough.

Bulls: The Case for Dividend Stocks

  • Steady Income: Dividend stocks pay out money even when the market is bumpy, helping investors get through tough times.
  • Less Risky: These stocks are usually less risky than others, so they don’t swing up and down as much.
  • Beating the Market: This year, funds that focus on dividend stocks, like the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) and the Vanguard High Dividend Yield ETF (VYM), are up about 4%—not counting the dividends they pay out.
  • Good in Rate Cuts: According to Wolfe Research, dividend “aristocrats”—companies that have raised their dividends for 25 years in a row—usually do well when the Federal Reserve cuts interest rates (Morningstar).

Bears: The Risks of Dividend Stocks

  • Not All Are Equal: Some high-dividend stocks can be risky if they pay out too much and can’t keep it up.
  • Slow Growth: These companies might not grow as fast as newer, riskier companies.
  • Market Still Matters: Even defensive stocks can go down if the whole market drops.
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Examples of Strong Dividend Stocks

Here are a few companies that are beating the market and paying reliable dividends:

  • Colgate-Palmolive: Up 14% this year, pays a 2.39% dividend. They just raised their payout for the 128th year in a row. Even though their forecast for 2026 wasn’t great, they’ve shown they can keep growing over time.
  • Johnson & Johnson: Up 17% this year, with a 2.15% dividend. They keep growing their business, have a big pipeline of new medicines, and recently made moves to help more people afford their drugs.
  • Fastenal: Up 13% this year, pays a 2.11% dividend. This company is expanding in manufacturing and building a huge new facility in Georgia.

Historical Context and Extra Insight

Dividend stocks have a long track record of helping investors in tough times. According to Ned Davis Research, since 1973, companies that steadily grow their dividends have outperformed the broader market by a wide margin. This shows that focusing on quality and reliability can pay off over the long term.

Investor Takeaway

  • Consider adding dividend-paying stocks to your portfolio for steady income and less risk during market swings.
  • Look for “dividend aristocrats”—companies that have raised their payouts for many years.
  • Don’t just chase the highest yields; focus on companies with a history of steady, growing dividends.
  • Remember, even defensive stocks aren’t risk-free, so keep your portfolio balanced.
  • Stay informed about changes in interest rates, as these can help dividend stocks do even better.

For the full original report, see CNBC

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