A Boring Dividend Growth Strategy Becomes a Solid Defensive Play

Key Points

• Dividend growth stocks can offer a steadier alternative as AI volatility, inflation concerns, and narrow market leadership push investors to look beyond high-growth names.
• Companies with long dividend-growth records often have the financial stability to continue rewarding shareholders through uneven market conditions.
• Aflac, Caterpillar and Texas Instruments give investors exposure to insurance, industrials and semiconductors while maintaining established dividend growth profiles.

Those chasing quick gains may still seek out AI and tech companies, although frequent calls for an AI bubble may be dampening the mood. Couple uncertainty around the future of this fast-growing industry with concerns surrounding inflation and a high concentration of market-wide gains in just a small number of big movers, and it's easy to see why investors might want to seek out a stable alternative.

Enter dividend-growth stocks, which benefit from rising distributions even if share-price appreciation is minimal. Investors looking for flashy returns may dismiss this category of stocks as "boring," but there's a reason why dividend exchange-traded funds (ETFs) have captured growing attention: the companies most likely to continue growing their dividends tend to also be highly stable, able to withstand market turbulence that many newer or faster-growing alternatives simply cannot. The firms below are not especially flashy but do have strong dividend-growth histories and offer attractive diversification across industries.

Aflac's U.S. Business Provides Stability, While Japan Has Growth Opportunities

Major insurance provider Aflac Inc. NYSE: AFL has managed 13% year-to-date (YTD) share price gains, driven mostly by a rally in the last three months following a Q1 2026 earnings report with several highlights. In the first quarter of the year, the $63-billion firm made significant headway in the Japanese market: third-party reinsurance for Aflac's Japanese business was small but growing, and the same segment also posted 25.5% year-over-year (YOY) sales growth. Major new products have helped drive this improvement and are likely to continue to fuel future gains as well.

While Aflac's U.S. business has not achieved the same level of growth in the last quarter (sales climbed by around 3% YOY), its persistency is high at 79.3%. The company has a stable U.S. business that has remained unfazed by sector-wide challenges such as affordability and coverage gaps. On top of that, strong liquidity of about $3.4 billion unencumbered as of Q1 has allowed Aflac both the flexibility to ride out turbulence and the capacity to return additional shareholder value through both buybacks and dividends.

Although Wall Street sees AFL shares as a Hold overall, the company's solid record of dividend increases continues to make it a popular passive-income option. AFL supports a 1.97% dividend yield with more than four decades of distribution increases, including most recently a 5.2% increase for Q1 2026.

Caterpillar's Data Center Business Growth May Outweigh Tariff Concerns

Caterpillar Inc. NYSE: CAT has managed to rally more than 50% YTD, despite falling throughout the month of July. In this way, share prices have appeared to coincide with the recent AI rally and pullback—no surprise, given that Caterpillar's construction equipment is in demand as data center projects continue at a rapid pace.

This tailwind has contributed to 22% YOY improvement in sales for the first quarter of the year, 30% YOY gains to adjusted earnings per share (EPS), and a dramatic uptick in backlog. These performance metrics are an encouraging sign that the company will be able to meet lofty sales growth and adjusted operating margin goals, despite hundreds of millions of dollars in quarterly costs related to tariffs and slow growth in key client industries.

Even with valuation concerns (CAT has a price-to-earnings ratio of almost 44), analysts rate the stock a Moderate Buy, with 15 Buys and 10 Holds. Its dividend yield is modest at 0.70% but will improve to 0.75% based on the upcoming distribution increase, the latest in a 30-year record.

A Semiconductor Standout With a Strong Dividend History

A semiconductor and analog circuit company with a sizable dividend, Texas Instruments Inc. NASDAQ: TXN stands out compared to its more growth-focused peers.

The company has solidified its position as a pick-and-shovel play in the AI space thanks to its power-regulating chips, which helped drive 19% YOY revenue growth last quarter. Data center revenue surged by about 90% over that period, prompting optimistic revenue and earnings guidance.

TXN is also managing to achieve top- and bottom-line growth while generating notable operating cash flow of about $1.5 billion and close to $1 billion in CHIPS incentives in Q1 alone. But what really sets this firm apart is its 2% dividend yield, supported by more than two decades of steady dividend increases. Analysts cautioning that some modest downside potential may be in store—and advising that TXN shares are a Hold—may be overlooking the appeal of this firm as a passive-income source.