Dividends & Dragons: A Prudent Portfolio

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gold one moment, breathes fire on your holdings the next, and generally makes a nuisance of itself. For a long while, the usual safe havens – the sturdy, dividend-paying blue chips – seemed to have lost their shine. Rising interest rates, you understand, are to a fixed-income investor what garlic is to a vampire: profoundly unsettling. CDs and T-bills, those pillars of cautious respectability, suddenly looked… appealing. But the Federal Reserve, in a series of pronouncements that would make a sphinx look verbose, began to lower those rates. And, lo, the income-seekers returned, like salmon swimming upstream to the promise of a decent yield.

Now, there’s talk of further cuts, especially if the current High Priest of the Federal Reserve is replaced by a fellow named Warsh.1 And, of course, the geopolitical situation is… let’s just say it’s complicated.2 Which means that a bit of defensive positioning is, shall we say, prudent. So, if you’re looking for a couple of stocks that won’t vanish in a puff of smoke when the dragon gets grumpy, consider these two: AT&T (T +1.91%) and Philip Morris International (PM 3.89%). They’re not glamorous, mind you. But then, neither is a well-maintained ledger.

The New AT&T: Shedding Skins and Building Towers

For a time, AT&T seemed determined to become the purveyor of all moving pictures, a sort of digital storyteller to the masses. It acquired DirecTV, dabbled in Time Warner, and generally accumulated assets like a magpie collecting shiny objects. Then, quite sensibly, it decided that perhaps it wasn’t very good at being a media mogul. It divested those assets, freeing up capital to focus on its core business: connecting people with little glowing rectangles. A remarkably sensible decision, really. It’s like a wizard realizing he’s better at brewing potions than conjuring illusions.

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The result? A leaner, more focused company. More subscribers to its 5G and fiber networks. And, crucially, a steady increase in adjusted earnings before interest, taxes, depreciation, and amortization – or EBITDA, as the alchemists of finance like to call it.3 From 2023 to 2025, EBITDA grew at a respectable 3% compound annual growth rate. And it generated a healthy $16.6 billion in free cash flow, more than enough to cover its dividends and buybacks. A company that can pay its bills and still have a bit of gold left over? That’s a company worth a closer look.

Analysts expect that growth to continue, with EBITDA projected to grow at a 4% CAGR from 2025 to 2028. The acquisition of EchoStar’s spectrum licenses should strengthen its 5G networks, and the takeover of Lumen’s home fiber business will expand its fiber footprint. AT&T currently trades at a mere 7 times this year’s adjusted EBITDA and yields nearly 4% in forward dividends. A low valuation and a high yield suggest a limited downside, and a safe haven for your capital should the market decide to throw a tantrum. And, being largely focused on the U.S. market, it’s reasonably insulated from the current global… disturbances.

Philip Morris International: A Resilient Smoke

Philip Morris International, spun off from Altria back in 2008, is a bit of an anomaly. It’s a tobacco company in a world that’s increasingly aware of the… drawbacks of smoking.4 Altria remained in the U.S., while PMI ventured overseas, becoming a global purveyor of nicotine. Both companies still own Marlboro, the world’s most valuable cigarette brand. It’s a bit like two wizards sharing a particularly potent spell book.

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You might think that a declining smoking rate would spell doom for PMI. But the company has proven remarkably adaptable. It raises cigarette prices, cuts costs, and, crucially, expands its portfolio of smoke-free products – including its iQOS heated tobacco products, e-cigarettes, and its Zyn nicotine pouches. It’s a bit like a dragon learning to breathe perfume instead of fire.

In 2025, PMI’s smoke-free revenue rose 14% organically, accounting for nearly 43% of its top line. That expansion is curbing its long-term dependence on cigarettes and making it a more viable long-term investment. Its adjusted earnings per share grew 15% to $7.54, easily covering its annual dividend of $5.64. It currently pays a forward yield of 3.2%.

Analysts expect PMI’s EPS to grow at a steady 9% CAGR from 2025 to 2028, driven by iQOS, Zyn, and its newer Veev e-vapor products, as well as its ongoing expansion into new markets. PMI is more exposed to overseas conflicts than Altria, but it’s reasonably insulated from any tariffs. The stock is still reasonably valued at 24 times this year’s earnings, and it should remain a good defensive stock even as fewer smokers light up its flagship Marlboro cigarettes.

1

Warsh, you see, has a reputation for being… fiscally conservative. Some might say “austere.” Which, in the world of central banking, is often a compliment.

2

Complicated is, of course, a gross understatement. It’s more like a particularly tangled ball of yarn, guarded by a grumpy cat.

3

EBITDA, or “Earnings Before Interest, Taxes, Depreciation, and Amortization,” is a metric favored by financial alchemists. It allows them to ignore certain… unpleasant realities, and focus on the underlying profitability of a business.

4

The drawbacks, of course, being that it’s demonstrably bad for your health. A fact that PMI acknowledges, while simultaneously continuing to sell cigarettes. A delicate balancing act, to say the least.

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2026-03-03 21:23