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In this market, investors may want to consider dividend stocks as a way to earn some income while helping stabilize their portfolio. Not only do dividends offer a reliable income stream, they signal confidence to the market and can help steady portfolios during periods of uncertainty and high valuations, Morgan Stanley strategist Todd Castagno said in a note Monday. Stocks remain near record highs , although October saw bouts of volatility that saw some of the largest one-day losses in stock market history. “During times of higher risk and valuations, dividends play a greater role in investors’ total returns, helping reduce volatility and offering some support for stock prices,” he wrote. “When growth slows and interest rates fall, stable, higher-yielding dividends become more appealing as cash and fixed income options lose their allure.” The Federal Reserve lowered interest rates by a quarter percentage point on Wednesday, but Chair Jerome Powell said a cut at its next meeting in December was not a foregone conclusion. One of Morgan Stanley’s dividend ideas focuses on companies with market caps over $100 billion that have increased their dividends by at least 15% quarter over quarter over the last 12 months. Castagno turned to those in the Russell 1000. Companies that raised their dividends saw their stocks outperform by an average of 3.1% six months after the policy change, he said. “Larger increases tended to lead to greater outperformance,” he noted. Here are some of the companies that made the list. PG & E , which has a 0.64% dividend yield, has increased its payout quarter over quarter by 150% in the last 12 months. It last increased its dividend in May. The California-based public utility issued mixed third-quarter results last week. Its adjusted earnings came in at 50 cents per share, topping the 42 cents a share expected from analysts polled by FactSet. Revenue, however, was $6.25 billion versus the $6.41 billion consensus estimate. The stock has an average analyst rating of buy and 35% upside to the average price target, per FactSet. Shares are down 22% year to date. Goldman Sachs , on the other hand, has seen its stock rally 38% this year. The bank, which has a 2.03% yield, topped Wall Street’s expectations on both the top and bottom line for its third quarter, thanks to stronger-than-expected investment banking and fixed income trading. GS 1Y mountain Goldman Sachs year to date The company increased its dividend by 33.3% quarter over quarter in the last 12 months. It most recently increased its payout in July. The stock has an average analyst rating of overweight and 4% upside to the average price target, according to FactSet. Lastly, Eli Lilly blew past Wall Street’s estimates when it reported third-quarter earnings on Thursday. The pharmaceutical giant also raised its full-year outlook amid strong demand for its blockbuster weight-loss treatment, Zepbound, and its diabetes drug, Mounjaro. Eli Lilly anticipates fiscal 2025 revenue in the range of $63 billion and $63.5 billion, up from previous guidance of $60 to $62 billion. It also hiked its full-year adjusted profit to a range of $23 and $23.70 per share from previous outlook of $21.75 to $23 a share. In addition, the company increased its dividend by just over 15% to $1.50 a share. The stock currently yields 0.71%. Shares, which have gained 10% year to date, have an average analyst rating of overweight, per FactSet. It has almost 11% upside to the average price target.
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