3 Dividend Stocks To Watch As High Rates Test Defensive Shares

With long term Treasury yields hitting multi decade highs and mortgage rates pressing above 7.3%, income investors are watching both bond and equity markets with unusual urgency. Higher borrowing costs can pressure many businesses; however, some large U.S. dividend payers have cash flows and payout habits that may hold up better when rates stay elevated. This article walks through three U.S. Large Cap Defensive Dividend Stocks from our screener that appear especially exposed to today’s rate driven news, and explains why their reactions to higher yields could matter for your portfolio decisions.

The three U.S. Large Cap Defensive Dividend Stocks covered below are just a starter set, and the full screen surfaced 21 more large issuers with income profiles and business stories that are not discussed here but may warrant a closer look. To see the complete group and sort it by yield, balance sheet strength, and volatility, head straight into the U.S. Large-Cap Defensive Dividend Stocks screener.

Abbott Laboratories sits in the U.S. Large-Cap Defensive Dividend Stocks screen because its healthcare focus, globally diversified product lines and long dividend history align with investors looking for durable income rather than cyclical swings.

Abbott Laboratories runs a broad healthcare portfolio across medical devices, diagnostics, nutrition and established pharmaceuticals, generating about US$22.5b from devices, US$10.0b from diagnostics, US$8.3b from nutrition and US$5.8b from established pharmaceuticals, and carries a market value around US$175.3b.

For income focused investors tracking long term yields and higher borrowing costs, Abbott Laboratories offers a healthcare cash flow story that leans more on recurring treatment needs than on credit cycles.

“Broader adoption of continuous glucose monitoring, including expected Centers for Medicare and Medicaid Services coverage for non insulin users that could open access to about 10 million additional Medicare beneficiaries, together with the planned U.S. launch of Libre Duo and further system integrations, can support higher CGM sensor volumes and contribute to top line growth.”

This raises a key question: what happens to margins and dividend strength if one unseen cost pressure inside this expansion path starts to bite harder than expected?

That hidden pressure point is exactly where the story gets interesting, and the full narrative for Abbott Laboratories shows how Abbott Laboratories’ dividend case holds up if costs accelerate.

Brown-Forman brings a classic consumer staples income story to this defensive dividend screen, with liquor brands that tend to hold shelf space even when rates are rising and consumers feel squeezed. This is exactly why its current demand and mix trends matter.

Brown-Forman produces branded spirits and ready-to-drink beverages worldwide, generating about US$3.9b from beverage alcohol consumer products, and has a market value around US$12.1b. This places it firmly in the large-cap defensive dividend bracket.

“Although Brown-Forman is benefiting from 9% organic net sales growth in emerging international markets led by Mexico and the UAE, these regions may not be able to backfill the revenue and mix impact from ongoing weakness in full-strength tequila. Low teens organic net sales declines and pressure on Herradura at the $40+ price point could weigh on segment earnings and consolidated revenue growth.”

What happens to Brown-Forman’s income story if one quiet shift in where profits are earned starts to reshape how dependable those payouts feel?

That shift in profit mix is exactly what you need to weigh, and the full narrative for Brown-Forman maps how Brown-Forman’s brand strength and pricing power could still compound income potential.

Southwest Gas Holdings offers classic defensive, dividend-focused exposure in the screener, since its regulated natural gas distribution business is built around serving more than 2.2 million customers across Arizona, Nevada, and California. This business generates about US$1.7b from natural gas distribution on a roughly US$6.0b market value.

Rising long term yields have pushed many rate sensitive stocks onto investor watchlists, and Southwest Gas Holdings sits in that camp as a regulated utility whose appeal rests on stable cash flows, rate base growth and a steady dividend profile.

“Regulatory tailwinds, cost discipline, and restructuring efforts are improving margin stability, balance sheet strength, and profitability.”

The real swing factor is how one capital intensive growth project ultimately feeds through allowed returns and keeps those regulated margins where income investors expect them.

That capital question sits at the center of the story, and the full narrative for Southwest Gas Holdings shows how those investments could translate into accelerating earnings power and steadier dividends.

Seeking Fresh Alternatives Before They Fly

Fresh opportunities often move from quiet to crowded fast. Spot companies building breakout momentum while they are still under the radar for now, then get in early.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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