By Ian Salisbury

With the stock market looking wobbly, it may be time to play defense and take a look at companies with solid earnings and dividends whose businesses are likely to hold up in a downturn.

It's been a great year for stocks, but in the past few days the bull market seems to have lost some of its mojo. The S&P 500 fell about 1.5% this past week, its worst performance in more than a month. The tech-heavy Nasdaq Composite sold off even more heavily, down 3%, its biggest decline since April's tariff-related scare.

Meanwhile the broader economy was already looking strained, thanks to a string of high-profile corporate layoffs. Data released Friday also showed a decline in consumer sentiment.

The upshot: Investors may want to consider tilting portfolios toward the defensive. To help you brainstorm, Barron's ran a stock screen via FactSet and looked for companies with large market capitalizations in three classically defensive sectors -- consumer staples, utilities, and healthcare -- that also boast solid earnings and dividends.

When it comes to earnings, Barron's looked for companies Wall Street thinks can grow operating profits by at least 5% next year. That's only about half the pace of the broader market -- but well above inflation, suggesting these companies aren't merely treading water.

We also looked for another marker of health and stability: Dividends. Quarterly payouts can provide a return cushion against price declines and may signal financial discipline. All our picks boast a dividend yield above the S&P 500's anemic 1% -- and most of them offer a payout rate that's double the average.

Finally, as another safeguard of financial health, we looked for companies with dividend payout ratios of no more than 60% -- meaning dividend payments ate up no more than 60% of the businesses' quarterly profits.

Renewable energy company AES, with a yield of 5.4%, offers the highest payout on our list. It's worth noting the power producer -- which has seen its share price struggle amid the Trump administration's rollback of clean energy credits -- has recently been the subject of takeover rumors. An AES spokesperson previously stated the company would not respond to "rumors in the marketplace."

Other top names include retailers Dollar General and Kroger, as well as healthcare stalwarts Merck and Abbott Labs. The full list is below.

10 Defensive Stocks with Solid Earnings and Dividends

AES Corp. / AES

Market value: $10 billion

Dividend yield: 5.4%

Estimated 12-month earnings growth: 12%

Forward price-to-earnings ratio: 6.2

Dollar General / DG

Market value: $22 billion

Dividend yield: 3.3%

Estimated 12-month earnings growth: 5.3%

Forward price-to-earnings ratio: 15

Merck / MRK

Market value: $214 billion

Dividend yield: 3.1%

Estimated 12-month earnings growth: 16%

Forward price-to-earnings ratio: 9.3

CenterPoint Energy / CNP

Market value: $26 billion

Dividend yield: 2.6%

Estimated 12-month earnings growth: 9%

Forward price-to-earnings ratio: 21

American Water Works / AWK

Market value: $25 billion

Dividend yield: 2.5%

Estimated 12-month earnings growth: 8.4%

Forward price-to-earnings ratio: 22

Atmos Energy / ATO

Market value: $28 billion

Dividend yield: 2.3%

Estimated 12-month earnings growth: 11%

Forward price-to-earnings ratio: 22

Kroger / KR

Market value: $43 billion

Dividend yield: 2%

Estimated 12-month earnings growth: 7.8%

Forward price-to-earnings ratio: 13

Quest Diagnostics / DGX

Market value: $20 billion

Dividend yield: 2%

Estimated 12-month earnings growth: 10%

Forward price-to-earnings ratio: 18

Abbott Laboratories / ABT

Market value: $220 billion

Dividend yield: 2%

Estimated 12-month earnings growth: 10%

Forward price-to-earnings ratio: 23

NRG Energy / NRG

Market value: $33 billion

Dividend yield: 1.8%

Estimated 12-month earnings growth: 33%

Forward price-to-earnings ratio: 19

Source: FactSet

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.

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November 08, 2025 13:10 ET (18:10 GMT)

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