Key Points
A sharp pullback in semiconductor shares has triggered a flight to safety, lifting shares of reliable dividend payers such as Kroger (NYSE: KR), Verizon (NYSE: VZ), and Costco Wholesale (NASDAQ: COST). All three advanced roughly 2% on Tuesday as investors repositioned away from high-flying tech names.
Image source: Getty Images.
Shift Toward Defensive Holdings
Market leaders such as Alphabet are facing pressure for accelerating capital expenditures, as investors grow impatient with the ballooning spending plans of hyperscalers and other tech giants. Simultaneously, companies like ASML Holding—once thought to possess unassailable competitive moats—are confronting new threats from emerging rivals in China and elsewhere. The combined effect has prompted investors who were previously bullish on AI-related equities to dial back risk, steering capital toward more defensive dividend stocks.
Three Dividend Stocks to Consider
Costco Wholesale shares have climbed 13% year-to-date. In today’s inflationary environment, the warehouse retailer’s curated merchandise, low prices, and treasure-hunt shopping experience continue to resonate with cost-conscious consumers.
Verizon is adding subscribers through flat-rate unlimited mobile plans and bundled wireless and internet offerings. The telecom giant’s free cash flow rose 16% in the first half of the year, and its stock has gained 19% over the same period.
Kroger benefits from a shift toward at-home dining. The grocer is cutting prices to drive volume, which compresses margins in the near term. However, with shares down 6% this year and trading near 11 times forward earnings, the stock is approaching attractive valuation territory.
