Trivariate Research advises investors to turn to dividend growth stocks to fortify portfolios against market selloffs, citing the diminished role of traditional defensive sectors. The firm’s criteria include five-year consistent dividend growth, over 7% forecasted sales growth, and 10% anticipated earnings growth. Companies like Rollins and Cheniere Energy are highlighted as top picks, alongside Microsoft, Abbott Laboratories, AbbVie, and Stryker, offering a blend of stability and growth potential.
In today's unpredictable markets, safeguarding your investment portfolio requires a strategic approach. According to a recent report from Trivariate Research, focusing on companies with a robust history of dividend growth can offer crucial downside protection when major averages, like the S&P 500, experience selloffs and bond yields surge.
Trivariate founder Adam Parker notes a historical shift in defensive investing. Traditionally, investors seeking stability gravitated towards sectors with predictable revenue streams such as pharmaceuticals, telecoms, consumer staples, or utilities. However, Parker highlights a significant change: these conventional defensive sectors now constitute a much smaller portion of the S&P 500's market capitalization, shrinking from nearly 30% two decades ago to just over 10% today.
To adapt to this evolving landscape, Trivariate Research has identified a new class of defensive plays. Their criteria for these resilient stocks include a consistent track record of dividend growth over at least the past five years, a strong indication of continued payment increases, forecasted sales growth of at least 7%, and anticipated earnings growth of 10%.
Several companies made Trivariate's discerning list, demonstrating these protective qualities:
- Rollins (ROL): This pest control giant increased its dividend by over 10% last October. Despite a slight dip in shares this year, analysts remain optimistic. Goldman Sachs' George Tong reiterated a 'buy' rating, praising Rollins as a "durable compounder with economic and AI resilience" and multiple growth levers. The stock enjoys strong Wall Street support, with 12 out of 19 analysts rating it a buy or strong buy, projecting an 18% upside.
- Cheniere Energy (LNG): A leading liquefied natural gas (LNG) player, Cheniere also hiked its quarterly dividend by more than 10% in October. The company has seen a 26% stock increase this year, partly fueled by reduced LNG production in the Middle East amidst geopolitical events. Cheniere recently surpassed earnings estimates and raised its full-year guidance, exporting a record 187 cargoes in the first quarter. Mizuho analyst Gabriel Moreen rates it 'outperform', citing strong volume outlook and project execution. Wall Street consensus is overwhelmingly positive, with 23 out of 24 analysts rating it a buy or strong buy, forecasting nearly 23% upside.
Other notable companies appearing on Trivariate's list include tech titan Microsoft, healthcare leaders Abbott Laboratories and AbbVie, and medical technology firm Stryker.
Investors looking to fortify their portfolios against market downturns may find these dividend-growing stalwarts a compelling option for long-term stability and growth.
