Jefferies flags high-dividend U.S. stocks as hedge against market volatility

Traders Union
All News
Financial News
Jefferies on defensive stocks

Highlights

Jefferies strategist Desh Peramunetilleke recommends U.S. stocks with market caps above $10 billion and forward dividend or free cash flow yields above 3% as a volatility hedge.
Procter & Gamble, offering a 3% 12-month forward dividend yield, stands out after surpassing expectations in April and is set to report Q4 results July 29.
Pfizer features a 6.9% forward dividend yield despite being down about 2% in 2024, while KeyCorp posts a 3.8% yield with a 12% year-to-date gain before Q2 earnings July 21.

Jefferies screen highlights defensive stock picks

As reported by CNBC, Jefferies strategist Desh Peramunetilleke says investors looking for shelter this summer may want to focus on low-volatility stocks with high dividends or free cash flow yields instead of more crowded AI trades.

In a note last week, Peramunetilleke says volatility in the AI theme has spiked amid concerns about hyperscaler return on investment, possible overcapacity, elevated expectations, large fund-raisings and heavy retail positioning. He adds that while AI remains a long-term winner, those pressures could still trigger an unwinding of AI-led momentum.

To identify candidates, Jefferies screens for U.S. companies with market capitalizations above $10 billion that sit in the bottom quintile of volatility. The firms also need either a 12-month forward dividend yield above 3% or a free cash flow yield above 3% over the last 12 months, along with positive or flat estimated 2026 earnings-per-share revisions over the past three months.

Dividend yields offer support across sectors

Among the names highlighted, Procter & Gamble stands out as a traditional defensive stock with a 12-month forward dividend yield of 3%. The consumer goods company is due to report fiscal fourth-quarter earnings on July 29, after posting adjusted earnings per share and revenue above expectations in April as product volumes grew for the first time in a year.

Pfizer, which is down about 2% for the year, offers a 6.9% 12-month forward dividend yield, according to Peramunetilleke. The drugmaker is expected to report results on Aug. 4, after beating Wall Street estimates for first-quarter earnings and revenue in May.

A real estate investment trust on the screen carries a 12-month forward dividend yield of 4.30% and is up 18% in 2026. KeyCorp also appears on the list with a 3.8% forward dividend yield and a gain of about 12% year to date, ahead of its second-quarter earnings report due July 21 after first-quarter earnings and revenue topped estimates in April.

Our earlier analysis of Canadian Natural Resources (CNQ) focused on how strong free cash flow in Q1 2026 supported sizable shareholder returns through dividends and buybacks. We also noted that despite solid fundamentals, the stock was meeting technical resistance near its 50-day moving average, with momentum indicators suggesting caution in the near term.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.