These dividend stocks are up since war began. Street sees more ahead
Investors looking for protection during market volatility often turn to dividend-paying stocks. These days, they are also moving into small- and mid-cap dividend names. The markets have been churning all year, particularly since the start of the Iran war on Feb. 28 and rally in the price of crude oil. On Wednesday, stocks moved higher following reports that the United States sent Iran a plan to end the conflict . Still, the S & P 500 is down about 4% year to date. Meanwhile, the small-cap focused Russell 2000 is slightly positive in 2026. Bank of America expects small- and mid-cap stocks, helped by faster earnings growth, to outperform mega caps this year. While the firm has been bullish on small caps since last summer, higher oil is also a modest positive to earnings, said Jill Carey Hall, head of U.S. small- and mid-cap strategy at Bank of America. “If this event plays out and oil stays at elevated levels for longer, small caps do have more exposure to sectors that are beneficiaries of higher oil rather than sectors that are hurt, like consumer,” she said in an interview with CNBC’s ” Squawk Box ” Wednesday. Small caps are also negatively correlated with volatility, and the CBOE Volatility Index has jumped from a low of 13 late last year to more than 25 this month, Carey Hall said in a report last week. VIX levels over 20 signal increased investor uncertainty and fear. Mid-caps outperform Mid-cap stocks are faring even better than small caps, with the mid-cap S & P 400 index adding nearly 3% year to date. The companies are usually seen as more stable than small-cap businesses. In addition, they tend to be less expensive than large caps. Dividend stocks are also outperforming the broader market this year as investors seek reliable income to smooth out the bumps. The companies are also generally considered defensive and therefore less volatile than the wider market. Combining dividends with small- and medium-cap stocks could turn into a winning strategy for investors focusing on quality names. “Within small caps, high quality stocks and those returning cash to shareholders have historically been the best performing styles amid a rising VIX,” Carey Hall said in her note. Upside ahead To find stocks that are not only higher since the start of the Iran war, but are also loved by Wall Street and pay dividends, CNBC Pro screened for names in the S & P 400 and the small-cap S & P 600 . Each one is up at least 1% month to date and have a buy rating from 55% or more of the analysts covering them, according to FactSet. The companies also have upside of at least 10% to analysts’ average, 12-month price target. Companies in the S & P 400 have unadjusted market caps between $8 billion and $22.7 billion, while S & P 600 stocks have unadjusted market caps between $1.2 billion and $8 billion. Three of the four names are in the energy sector and are benefiting from the rise in oil prices. A geopolitical risk premium will have a lasting impact on oil prices, regardless of how long the war lasts or when crude supplies return to normal, JPMorgan analyst Arun Jayaram said in a note Friday. “We think U.S. shale-levered companies, as well as their Canadian Oil Sands counterparts, could emerge as relative winners, particularly as oil consumers may look to diversify their purchases away from the Middle East and focus on oil supplies located in fiscally stable regimes with secure supply chains,” he wrote. JPMorgan upgraded small-cap Crescent Energy to overweight after not rating the stock due to a conflict of interest. Before that, Crescent had been rated neutral at JPMorgan. The stock also has a 3.8% dividend yield. CRGY YTD mountain Crescent Energy year to date Jayaram also has overweight ratings on California Resources , another small-cap stock, and Viper Energy , a mid-cap name. The former has 2.5% dividend yield and 12% upside to the average price target, while the latter yields 4.6% and has 10.5% upside, per FactSet. The average price target on Crescent Energy suggests the stock can rally nearly 18% The other company that made the cut is mid-cap insurer Unum . It has a 2.5% dividend yield and about 26% upside to the average price target, according to FactSet data.
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