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Investors looking to play defense may want to consider buying certain dividend stocks, according to Trivariate Research founder Adam Parker. Markets have been rocked by volatility this year. On Monday, the Dow Jones Industrial Average , S & P 500 and Nasdaq Composite all moved higher , after selling off on Friday amid concerns over Israel’s airstrikes on Iran. While recent interactions with institutional investors signal that many think the S & P will continue to move higher, Parker and his team are also regularly asked about attractive defensive stocks, he said in a June 8 note. With the “old school” traditional playbook of defensive stocks like consumer staples, pharmaceuticals and telecoms is “broken,” Trivariate Research has identified several ways investors can get defensive — including dividend-paying equities. “We think companies with consistent dividend growth are likely to provide strong defense if there’s a growth scare,” Parker wrote. “Specifically, our past work shows that companies that have grown their dividend over the last five years and that are indicated to have continued dividend growth, as well as at least 7% forecasted sales growth and 10% forecasted earnings growth outperform.” Here are some of the names that Parker and his team say fit the bill. The screen does not include valuation since stocks that experience multiple contraction before corrections perform the worst during the corrections, he said. Microsoft , which once again became the world’s largest company by market cap earlier this month, has a dividend yield of 0.70%. The tech giant managed to hit a record close of $467.68 on June 5 — on a day when tech stocks broadly dropped. Shares have climbed even higher since that time, closing at $478.87 on Thursday and hitting a 52-week high of $480.69 on Monday. MSFT YTD mountain Microsoft year to date Microsoft has an average analyst rating of buy and nearly 8% upside to the average price target, according to FactSet. The stock is up about 14% year to date. Eli Lilly is the only pharmaceutical name that made the cut. The company pays a 0.73% dividend yield and has gained 5% so far this year. In May, Eli Lilly reported an earnings and revenue beat for its first quarter, but it lowered its full-year profit guidance because of charges related to a cancer treatment deal. The company maintained its full-year sales guidance. CEO Dave Ricks told CNBC after the company’s earnings report that the use case for its popular weight-loss and diabetes drugs is “massive.” Mounjaro is Eli Lilly’s diabetes treatment and Zepbound is its obesity drug. “Today we probably have about 10 million Americans taking GLP-1s. The market opportunity is much, much larger than that,” Ricks said in an interview with ” Squawk Box ” on May 1. “We see this as a big wave of innovation for many years to come and Lilly is at the forefront of that.” Eli Lilly has an average rating of overweight and nearly 21% upside to the average price target, per FactSet. Investors looking for a higher payout can turn to Philip Morris International , which yields 2.93%. The popularity of the tobacco giant’s smoke-free products , notably its Zyn oral nicotine pouch, have helped push shares more than 50% higher this year. The company plans to ultimately replace cigarettes with smoke-free alternatives. The stock has an average analyst rating of overweight and 1.3% upside to the average price target, per FactSet. Meanwhile, utility companies are known for their dividends but NextEra Energy is the only name in the industry that made the list. The stock has a 3.03% yield and has gained about 3% year to date. NextEra shares have an average rating of overweight and 11% upside to the average price target. Lastly, Eaton is expected to benefit from the artificial-intelligence data center boom, as well as reshoring — when companies return operations to the United States. Yet providing power management solutions for data centers and manufacturing facilities is one segment of its business. It also has a hand in the aerospace industry, providing fuel, hydraulics, and pneumatic systems for commercial and military use. It is the latter business segment that is expected to benefit from the deal Eaton struck on Monday to acquire defense group Ultra PCS Limited from the Cobham Ultra Group for $1.55 billion. Ultra PCS produces products and aftermarket services for the aerospace market. Eaton has a 1.29% dividend yield and is up 2% year to date. The stock has an average rating of overweight and nearly 4% upside to the average price target, according to FactSet.
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