ISS Stoxx flags dividend stocks as midterm volatility hedge

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Dividend stocks as volatility hedge

Highlights

ISS Stoxx screens Russell 1000 for cash-rich, low-risk stocks like PepsiCo, Bank of New York Mellon, and Visa as a hedge ahead of November's midterm election volatility.
PepsiCo maintains its Dividend King status with a 4% dividend hike in February 2026 and a 4.2% yield, despite a nearly 2% year-to-date stock decline.
Bank of America sees BNY and Visa as beneficiaries of a higher-for-longer rate policy, with price targets implying 26% and 13% upside, respectively, from Thursday's close.

Screening for stability before the election

As reported by CNBC, ISS Stoxx uses its Economic Value Added, or EVA, framework to screen the Russell 1000 for cash-generating stocks that combine strong profitability with lower risk ahead of the November midterm elections.

The firm argues that legislative gridlock is likely if Democrats win at least one chamber of Congress, a scenario that election forecaster FiftyPlusOne currently favors. Casey Lea, global director of quantitative research at ISS Stoxx EVA, says quality has generated the most alpha in the 12 months following a midterm election when a Republican president loses full control of Congress, with high-profit and low-risk themes among the strongest performers.

PepsiCo is among the names identified by the screen. The beverage and snacks company belongs to the Dividend Kings group and has raised its dividend for more than 50 years, with a 4% increase in February marking its 54th straight annual hike in 2026. The stock is down almost 2% year to date and offers a dividend yield of 4.2%.

Bank of New York Mellon and Visa also appear on the list. BNY shares have risen nearly 40% this year and yield about 1.6%, while Visa is up nearly 9% in 2026 and yields 0.7%.

Analysts point to earnings resilience and rate support

PepsiCo's inclusion comes even as U.S. consumers face tighter budgets from persistent inflation and higher gasoline prices, pressures that contribute to the company's second-quarter earnings miss. Piper Sandler analyst Michael Lavery says U.S. organic growth recovery remains slow, but international momentum stays strong and supports margins in the second half of 2026. He maintains an overweight rating and a $176 price target, implying about 26% upside from Thursday's close.

For BNY, Bank of America says in June that the custody bank is well positioned for a higher-for-longer interest rate environment because of its capital-light model, high return on equity, limited credit risk and sticky client relationships. Fed funds futures now imply a nearly 58% chance of a Federal Reserve rate increase in September after Fed Chairman Kevin Warsh says at Jackson Hole that better summer inflation readings do not yet signal a meaningful improvement in underlying trends.

Visa also draws support from Bank of America, which last month reiterates its buy rating and lifts its price target to $430, suggesting roughly 13% upside from Thursday's close. Analyst Matthew O'Neill describes Visa as one of the highest quality compounders in payments, citing its latest quarterly beat, modest full-year guidance increase, diversified network and lower Middle East exposure than peers.

Our earlier coverage of Kevin Warsh’s Jackson Hole remarks explained why investors quickly shifted back toward a higher-for-longer rate outlook as he stressed that inflation remains elevated and financial conditions are not yet restrictive. We noted that his comments pushed short-term Treasury yields and the dollar higher while lifting expectations for another near-term Fed hike.

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