Investors seeking to shield themselves from risks associated with artificial intelligence may want to explore certain dividend-paying stocks, as suggested by investor Jenny Harrington. Dividend stocks have been performing well this year, with investor sentiment shifting from large-cap technology companies to more traditional “old economy” stocks. According to Harrington, CEO of Gilman Hill Asset Management, the iShares Select Dividend ETF has risen nearly 11% year-to-date, while the Schwab US Dividend Equity ETF has experienced a gain of about 15%. In contrast, the S&P 500 index has remained largely unchanged.
This shift in investment strategies comes as market participants recalibrate their portfolios, acknowledging that the disparity in performance and valuation between big technology firms and traditional stocks has become excessively pronounced. Harrington highlights the significant market downturn for software stocks earlier this month, triggered by concerns over potential disruptions from AI advancements, such as Anthropic’s new model that could streamline legal tasks traditionally requiring costly software licenses. The iShares Expanded Tech-Software Sector ETF has seen a drastic decline, plummeting nearly 23% this year.
In light of these industry dynamics, Harrington is focusing on companies that should remain stable despite the ongoing AI revolution. Citing everyday consumer needs, she emphasizes that even in challenging economic conditions, people will continue to buy essential goods. One of her top stock picks is Kimberly-Clark, renowned for brands like Huggies and Cottonelle. The company, which boasts over 90 years of dividend payments and 54 years of increases, has a dividend yield of 4.66% and is currently trading at 14.5 times its earnings. Harrington anticipates improved earnings growth as the benefits of Kimberly-Clark’s recent acquisition of Kenvue, the maker of Tylenol, materialize.
Another notable investment recommendation from Harrington is Vici Properties, a real estate investment trust (REIT) that leases properties to prominent Las Vegas casinos, including Caesars Palace, MGM Grand, and the Venetian Resort. With a generous dividend yield of 6.06% and a favorable valuation of 12 times its funds from operations, Vici Properties is characterized by its high-quality assets. Harrington is optimistic about the stability of its long-term leases, suggesting that the tenants are well-prepared to weather economic downturns.
Unilever, a global consumer staples entity known for its diverse product range, including food and household items, is also on Harrington’s radar. The stock, trading at 17 times earnings, offers a valuation discount compared to its competitor, Procter & Gamble, which trades at over 20 times earnings. Harrington notes that the valuation gap is beginning to narrow, presenting further investment potential.
Additionally, Harrington highlights Enterprise Products Partners, a company that provides midstream energy services. With a reliable financial foundation and a stock yielding 6.09%, it has accrued 13% in gains this year, showcasing resilience amidst market fluctuations.
As the conversation surrounding AI’s impact on various sectors continues, Harrington’s focus on stable, dividend-paying stocks reflects a broader trend among investors keen to navigate the complexities of the current market environment without abandoning conventional investment wisdom.
