When the major market averages begin to struggle, as we are experiencing in July, investors are often best served by looking for high dividend payers in defensive sectors. These are the types of stocks that tend to do well in a bearish market phase, and with a healthy dividend component, they can provide a decent income stream as well. AT & T (T) Our first candidate is from the old telecom group within the communication services sector.
While the largest names in this sector, such Alphabet and Meta Platforms have struggled in July, AT & T has managed to score a key breakout above price resistance. The breakout in late June pushed T above the February high around $18.20.
A subsequent pullback saw the price bounce off that breakout level, which also lined up with the 50-day moving average. Now we observe a clear pattern of higher highs and higher lows in a stock that pays about a 5.7% dividend yield, meaning investors are rewarded with both price gains as well as a fairly consistent dividend stream.
British American Tobacco PLC (BTI) U.S.-based tobacco companies such Altria and Philip Morris have already experienced significant price gains in 2024, so I'd be looking at a stock like BTI — which is potentially much earlier in a new uptrend.
And with a dividend yield over 8%, this means a strong income component to this play as well. British American spent the entirety of 2023 below a downward-sloping 200-day moving average. In April 2024, we saw BTI retest the December 2023 low, forming what now appears to be a confirmed double bottom pattern.
Since that April low, BTI has pounded out a consistent pattern of higher highs and higher lows, and now sits above two upward-sloping moving averages. Eversource Energy (ES) One of the biggest changes in July from a sector perspective has been an improvement in defensive sectors like utilities. This is a sector full of low-volatility, high yielding stocks that have often provided downside protection in down market phases.
Eversource Energy is one that may be early on in a new uptrend. Much like BTI, Eversource spent all of 2023 below two downward-sloping moving averages. This chart also features a double bottom pattern, with clear price support at the November 2023 and January 2024 lows around $52.
This stock was rangebound through the Fourth of July holiday, but in the subsequent weeks we've seen a dramatic improvement in price trend. ES just broke to a new three-month high this week, and the stock features a dividend yield around 4.5%.
When the broad market averages take a bearish turn, equity investors are often best served by getting defensive. These three stocks feature improving technical profiles, along with dividend yields well above the average for the S & P 500. While we can't know for sure what may happen next to the S & P 500 and Nasdaq, savvy investors know that defensive plays like these can provide opportunity when the situation seems most dire.
-David Keller, CMT marketmisbehavior.com DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium.
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