By Jacob Sonenshine

The S&P 500 has rallied from its Iran war-driven low, standing at an almost 5% gain for the year. Those who don't want to chase the stocks at nosebleed levels can find promising investments in a select group.

The index's advance is driven by an almost 35% rise this year for the VanEck Semiconductor ETF. The companies in that ETF have benefited from undying chip demand from the big internet and software companies that are building data centers.

Also, the State Street Industrial Select Sector SPDR ETF is up more than 10%, driven by several manufacturers that supply products for data centers.

Shareholders of those companies are sitting pretty on their gains, but those looking to put new money to work should look elsewhere. The reason: the data center-exposed stocks are vulnerable to steep declines if one of the large internet or software companies signals it will slow down the growth of its investments in data centers.

That's where Trivariate Research's dividend-paying stocks come in. These aren't classic "dividend names" that have particularly high yields. Some of them have relatively low yields, but can grow their dividends, which helps nudge their yields higher. Part of the idea is that many of these businesses have plenty of cash and potential earnings growth that can bring their share prices higher.

With that said, we'll break down how Trivariate's Adam Parker identified his basket of stocks. He looked at the universe of names with at least $10 billion market capitalizations, that have dividend yields of at least 0.1% (so they pay some dividend, even if it's low), and have increased their payment in the past 12 months. Today, this universe totals 479 tickers. Stocks with these characteristics have outperformed a universe of the top 700 market cap stocks without these characteristics by a cumulative 500 percentage points since 1999.

That's nice to know, but Parker's dividend universe also has outperformed the others by about 50 points in the past five years, meaning these companies have done something right more recently.

To create a list of the best names in this dividend universe, Parker identified firms that have increased their dividends this year and are in the bottom quintile of dividend payout ratios. That means they pay out a relatively low portion of their earnings -- and could easily have the financial capacity to keep increasing their payouts.

The list includes lesser-known companies such as Range Resources, Wesco International, Chubb Ltd., and Ametek.

We whittled down the list looking for companies that look able to pay out more dollars -- and are trading at cheap enough levels that they don't reflect the potential fundamental strength and payouts from the businesses.

So we found the names on Parker's screen that have net debt that's equal to or below 1.3 times expected 2026 earnings before, interest, tax, depreciation and amortization (Ebitda). That, according to our calculations of FactSet data, is roughly the aggregate ratio of net debt to Ebitda for S&P 500 companies, so those with lower ratios are relatively unburdened by debt and may have some wiggle room to lift dividends.

The second criteria was that, of those financially healthy companies, we only wanted ones that are trading at forward price/earnings multiples that are at the lower end of their 3-year ranges.

The names that fit the bill: Booking Holdings, Expedia, Synchrony Financial, Newmont Corp., and Agnico Eagle Mines.

Give some of these names a peek.

Write to Jacob Sonenshine at jacob.sonenshine@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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April 30, 2026 15:38 ET (19:38 GMT)

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