By Ian Salisbury

In a rocky market, dividend stocks can offer a measure of stability. Companies that consistently grow dividends and throw off healthy amounts of cash should deliver solid returns in 2026.

After some mid-November wobbles the S&P 500 index is up 16% year to date and back within 1% of its all-time high. That puts investors in a tricky situation. How do you simultaneously keep up with the market's returns and get some sort of protection if the bull market loses its current sense of conviction?

One way to achieve such a balance, according to Wolfe Research, is by buying companies that grow dividends and generate plenty of cash. "Surprisingly, many dividend investing strategies have kept pace with the broader market in 2025 despite their more defensive nature and lack of AI thematic," wrote Chief Investment Strategist Chris Senyek in a note Monday. "As the Fed cuts interest rates with some high divided yielding stocks exceeding Treasury rates, we expect dividend themes' momentum to continue in 2026."

To find potential winners, Wolfe screened for companies with high dividend growth and high free-cash-flow yield. Free-cash-flow yield compares the amount of cash a business throws off to its stock price. Extra cash can be used to cover the dividend, pay down debt, or invest back into the business.

Wolfe's list of about two dozen names is weighted heavily toward industrials and information technology. While both sectors have performed well in 2025, many of the individual names on Wolfe's list have seen share-price declines -- one reason their free-cash-flow yields are high.

The largest stocks by market value are Salesforce.com, Qualcomm, and Accenture. All three have lagged behind the market over the past 12 months. Salesforce, which will report third-quarter earnings on Wednesday, is down 29% in 2025. The enterprise-software company has struggled amid worries that artificial intelligence will eat into its business.

Salesforce isn't ignoring the threat. Its Agentforce AI platform is designed to incorporate AI capabilities into its business -- but the jury is still out, according to Wall Street analysts. In the meantime, revenue looks solid over the next few years, with analysts forecasting 9% growth in 2026 and 2027, according to FactSet.

Qualcomm, which makes chips for cellphones and other devices, has seen its shares return only about 9% so far this year, lagging behind the broader market as it has been hurt by slowing phone sales. Analysts expect slow-but-steady revenue and profit growth of 2% to 3% in the next two years.

In addition to these tech giants, Wolfe's list includes industrial companies Paccar, Snap-On, and Carlisle; energy companies Plains All American Pipeline and Viper Energy; and auto supplier BorgWarner and home builder D.R. Horton, among others.

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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December 01, 2025 13:54 ET (18:54 GMT)

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