By Ian Salisbury
The stock market is looking iffy. Dividend stocks may provide just the security investors are looking for.
The S&P 500, which entered the year riding one of the biggest bull markets in memory, is suddenly looking a lot more vulnerable. On Friday, the index sold off 1.1%, after a disappointing jobs report followed more news of violence in the Middle East.
Dividend stocks can provide shelter in the storm. Companies that commit to regularly handing cash back to shareholders tend to have mature, stable business models. What's more, cash these companies hand back can cushion the price declines, when it comes to measuring an investment's total return.
The Schwab U.S. Dividend Equity ETF declined about 0.9% Friday. But year to date the fund, which yields 3.4%, is beating the pants off the market. It's up 13%, compared with a 1% decline for the S&P 500.
A number of stocks in its portfolio bucked the selloff Friday. Lockheed Martin, which yields 2.1%. was up 2.1%. ConocoPhillips, with a 3.8%, yield gained 0.9%. Consumer staples like Coca-Cola, Hershey and General Mills were down, but only slightly.
Over time, the Schwab U.S. Dividend Equity ETF should be less volatile than the overall market. The fund typically catches only about 87% of the stock market's downside, according to Morningstar calculations. (Investors do pay for that security, however, it captures only about 68% of upside, Morningstar finds.)
Safety-minded dividend investors do face one conundrum. Many dividend paying companies are in old-line, hard-hat industries such as industrials and materials. Those sectors have done well so far in 2026, but they tend to be cyclical, thriving when the economy is strong and often struggling as it weakens. With war threatening to upend global trade and weak job numbers at home, that's a potential red flag.
The are some potential solutions. One is to focus on so-called dividend aristocrats, companies that have decadeslong track records of making and raising payouts. While their businesses may be economically sensitive, history shows they can manage ups and downs.
The ProShares S&P 500 Dividend Aristocrats, which yields 1.9%, is a popular option. Shares were down 1.1% on Friday. But given its portfolio's blue chip flavor -- top holdings include Caterpillar, Johnson & Johnson and Exxon Mobil -- investors should at least be able to count on steady payouts.
Another route is to focus on companies that have significantly increased their dividend payouts in recent years, like Vanguard Dividend Appreciation ETF. It's a strategy that focuses on strong earnings growth -- another big plus when the economy weakens. The downside of this approach is that it tends to emphasize tech companies. That means lower yields and less diversification away from core holdings like an S&P 500 index fund.
Vanguard Dividend Appreciation Index Fund yields 1.6%. Its top three holdings are Broadcom, Apple and Microsoft.
Write to Ian Salisbury at ian.salisbury@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 06, 2026 13:15 ET (18:15 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments