3 Stocks With Yields Big Enough to Make Election Volatility Easier to Stomach

Key Points

• Lincoln National pairs a dividend yield near 4.5% with annuity demand that tends to strengthen as interest rates rise.
• AbbVie has raised its dividend every year since its spinoff from Abbott Laboratories and grew second-quarter revenue 10%.
• Phillips 66 faces Wall Street forecasts for a roughly 7% earnings decline next year, a bar that could prove too low.

Election season has a way of making portfolios feel more fragile than they are. Polls point one direction, betting markets point another, and stocks swing on every headline about who controls Congress next.

That anxiety tends to push investors toward positioning for an outcome nobody can reliably call. Polling has missed badly in recent cycles, and fractures inside both parties make the numbers even harder to trust.

There's a cleaner approach. Instead of betting on a winner, own companies that pay cash regardless of the result. That's where midterm election dividend stocks earn their place. Dividend income shows up whether the market rallies or stumbles, and it compounds when reinvested.

Three names fit that mold across three very different corners of the market: an insurer leaning into higher rates, a drug giant with a long record of raising payouts and a refiner that Wall Street may be underestimating.

The Year After a Midterm Has Historically Favored Stocks

History leans bullish on the other side of the vote. Going back to 1900, the market has gained about 12.5% on average in the year after a midterm, according to Marc Lichtenfeld, Chief Income Strategist at The Oxford Club.

Narrow the window to 1980 onward, and the average return on the S&P 500 climbs to roughly 17.5%. Since 1938, the post-midterm year has been positive about 95% of the time, by his count.

The logic is less mystical than it sounds. By a president's second year, early enthusiasm fades, the opposition often gains ground, and gridlock sets in. Fewer sweeping laws mean businesses can plan with more certainty, and markets tend to reward that.

None of that is a reason to trade the election. Money needed within a year or two doesn't belong in stocks, in Lichtenfeld's view, and long-term investors are better off staying the course. A 3% to 5% dividend yield makes it easier to stomach when the market turns.

Rising Rates Turn Insurers Into Quiet Winners

Insurers collect premiums and invest them conservatively so claims can be paid. When rates climb, those portfolios earn more, but a $300,000 home policy still pays $300,000. The spread widens in the insurer's favor.

Lincoln National NYSE: LNC is Lichtenfeld's pick for this theme, but with a caveat. Annuities are one of its biggest revenue drivers, and he has long warned investors about their cost, complexity and steep early-exit penalties.

Demand doesn't care about that critique. Fixed annuities are popular, and higher rates make them more appealing. A 4% annuity was a tough sell a few years ago. At 6% to 7%, the math gets interesting for retirees chasing certainty.

Lincoln National has also transferred some reserves to a reinsurer, shifting a portion of potential life insurance claims off its own books. Add a dividend yield near 4.5%, and the stock pays investors to wait.

The market has cooled on financials after a run to record highs, partly a sell-the-news move once higher rates arrived. A steady climb in rates could lift margins and sentiment. A sudden spike is the risk worth watching.

Drug Demand Holds Up No Matter Who Controls Washington

Healthcare is about as recession-resistant as markets get. People with serious conditions find a way to fill prescriptions, regardless of the economy or the party in power.

AbbVie NYSE: ABBV has been one of Lichtenfeld's long-running favorites, dating back to when the stock was widely disliked. It has raised its dividend every year since its spinoff from Abbott Laboratories NYSE: ABT more than a decade ago, the kind of perpetual dividend raiser income investors prize.

The growth hasn't stalled. Revenue rose 10% in the second quarter, backed by a deep pipeline, some of the world's top-selling cancer drugs and a strong record on acquisitions.

The common objection is valuation after a long run. At roughly 20 times forward earnings, AbbVie isn't cheap—but it isn't stretched either. Continued earnings growth or a big pipeline win could support a higher multiple, and stocks making new highs often keep making them.

Policy is the real swing factor. Medicare price negotiations and Food and Drug Administration (FDA) approval timelines affect AbbVie just as they do Eli Lilly NYSE: LLY, Pfizer NYSE: PFE and Merck & Co. NYSE: MRK. A broad drug portfolio spreads that risk, and the industry ranks among Washington's largest lobbyists.

An Oil Risk Premium Could Keep Refiner Margins Elevated

Energy's case rests on a shift that may not unwind quickly. The disruption around the Strait of Hormuz exposed how easily supply can be choked off. Even with a peace deal, Lichtenfeld expects a lasting risk premium that keeps oil from revisiting $40 to $50 anytime soon.

Phillips 66 NYSE: PSX entered his portfolio before the conflict began, as a way to add refining exposure alongside pipelines and producers. Refining margins have since surged, and the company has raised its dividend every year for more than a decade.

Here's where it gets interesting. Because this year's earnings are so strong, Wall Street projects roughly a 7% earnings decline next year. Lichtenfeld, a former sell-side analyst, sees that forecast as too pessimistic, noting that the Street tends to arrive late. If Phillips 66 posts growth when analysts expect contraction, that gap could become a meaningful catalyst.

The risk is a recession or a peace agreement that compresses margins faster than expected. The upside is that the bar has already been set low. Watch refining margins and analyst estimate revisions for next year.

Income Is the One Election Outcome Investors Can Control

Lincoln National, AbbVie and Phillips 66 don't share a sector, a catalyst or a customer. What connects them is cash. Each pays investors while the political noise plays out, and each has a business driver that doesn't hinge on which party wins.

The setup depends on rates rising gradually rather than spiking, healthcare demand staying durable, and energy keeping some risk premium baked in. It doesn't depend on reading the polls correctly, timing the vote, or guessing how Congress splits.

In a midterm year, the election is a headline. The dividend is a deposit.

Stay focused on rate direction, refining margins and dividend growth, because those are what move these three stocks long after November.

For more of Lichtenfeld's income research, get the Oxford Income Letter and Marc Lichtenfeld's special report on his number one oil refinery pick.