BofA Securities Says Stagflation May Return: Grab These 4 Dependable Dividend Stocks Set to Outperform

If you were a big fan of “That ‘70s Show,” get ready because we will soon get a revival, and it will likely not be as entertaining. The Bank of America Securities team feels that the looming specter of stagflation, as we experienced in the 1970s, may be right around the corner, and with good reason. By definition, stagflation is a stagnant economy weakened by inflation. While the sticky inflation component remains in place, the potential for a stagnant economy is now being discussed on Wall Street.

The BofA Securities team had this to say regarding the potential for stagflation:

After the elections, we argued that the Trump policy agenda is a mixed bag for growth, and moderately inflationary. As it turns out, growth-negative policies – deportations, DOGE (Department of Government Efficiency) job cuts and tariffs (or the threats thereof) – have arrived sooner than expected. Meanwhile, there is a growing risk that fiscal stimulus will be modest and delayed because Republicans ended up with a much smaller House majority than expected. As a result, the “stagflation” narrative is gaining steam.

Many of the ingredients of the 1970s stagflation are present today. Inflation, as mentioned above, high commodity prices, massive budget deficits, and profligate government spending are just a few of the items stirring the pot. Now may be the time to move to dividend stocks that perform well during periods of stagflation. We screened our 24/7 Wall St. research database for stocks in sectors that historically outperformed during stagflation, including value stocks, commodities, aerospace and defense, real estate investment trusts, and more. Four top companies with dependable dividends, including one solid AI play, could be perfect ideas now. And all are Buy-rated as top Wall Street firms.

Why do we cover dividend stocks?

Dividend stocks provide investors with reliable streams of passive income. Passive income is characterized by its ability to generate revenue without requiring the earner’s continuous active effort, making it a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

Digital Realty Trust

Digital Realty Trust Inc. (NYSE: DLR) pays a solid 2.95% dividend as an industry leader and probably the best pure-play for AI exposure. It brings companies and data together by delivering the full spectrum of data center, colocation, and interconnection solutions.

PlatformDIGITAL, the company’s global data center platform, provides customers with a secure data meeting place and a proven Pervasive Datacenter Architecture (PDx) solution methodology for powering innovation and efficiently managing Data Gravity challenges.

Digital Realty gives its customers access to the connected data communities that matter to them. Its global data center footprint includes over 300 facilities in 50 metro areas in 25 countries on six continents. Some of the biggest companies in the tech industry, including AMD, Nvidia, and Oracle, are using Digital Realty Trust’s data center and cooling solutions.

The company announced earlier this last via press release:

Digital Realty has commenced construction of its third data center at its NRT campus in Inzai, Chiba Prefecture, in Japan. Utilizing PlatformDIGITAL, the facility is expected to open in December 2025 and will significantly increase the availability of state-of-the-art AI-ready infrastructure capacity in Japan. This announcement follows the recent launch of NRT12 on the same campus, solidifying Digital Realty’s commitment to providing customers with best-in-class data center solutions in Japan.

JPMorgan has an Overweight rating and a $190 target price.

Enterprise Products Partners

This company is one of the largest publicly traded energy partnerships and pays a 6.45% dividend. Enterprise Products Partners L.P. (NYSE: EPD) provides various midstream energy services, including:

• Gathering
• Processing
• Transporting and storing natural gas, natural gas liquids (NGL) fractionation
• Import and export terminalling
• Offshore production platform services

The company has four reportable business segments:

• Natural Gas Pipelines and Services
• NGL Pipelines and Services
• Petrochemical Services
• Crude Oil Pipelines and Services

Many top Wall Street analysts like the stock because of its distribution coverage ratio, which is well above 1x. This makes the company relatively less risky in the MLP sector.

Truist Financial has a Buy rating and a $40 target price.

Lockheed Martin

This company is one of the top aerospace and defense stocks to buy. It is close to a big breakout and pays a dependable 2.65% dividend. Lockheed Martin Corp. (NYSE: LMT) researches, designs, develops, manufactures, integrates, operates, and sustains advanced technology systems, products, and services.

The company operates in five principal business segments:

• Aeronautics
• Missiles and Fire Control
• Mission Systems and Training
• Space Systems
• Information Systems and Global Solutions

It also provides a wide range of defense electronics products and IT services.

As the Pentagon’s prime contractor, Lockheed Martin plays a crucial role in national defense, offering a diverse portfolio of global aerospace, defense, security, and advanced technologies.

Its leveraged presence in the Army, Air Force, Navy, and IT programs guarantees a steady inflow of follow-on orders from the U.S. government and many foreign allies of the nation.

JPMorgan has an Overweight rating with a $535 target price.

Prudential Financial

With a rich 4.95% dividend, this insurance and investment giant is a very safe idea for conservative investors. Prudential Financial Inc. (NYSE: PRU) provides insurance, investment management, and other financial products and services in the United States and internationally.

It operates through five segments:

• PGIM
• Retirement Strategies
• Group Insurance
• Individual Life
• International Businesses segments

The PGIM segment offers investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies to institutional and retail clients and its general account.

The Retirement Strategies segment provides a range of retirement investment and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors. It develops and distributes individual variable and fixed annuity products.

The Group Insurance segment offers:

• Various group life plans
• Long-term and short-term group disability
• Group corporate-, bank-, and trust-owned life insurance in the United States primarily for institutional clients for use in connection with employee and membership benefits plans
• Accidental death and dismemberment and other supplemental health solutions
• Plan administration services in connection with its insurance coverages

The Individual Life segment develops and distributes variable life, universal life, and term life insurance products.

The International Businesses segment develops and distributes life insurance, retirement products, investment products, and specific accident and health products and advisory services. The company provides its products and services to individual and institutional customers through its proprietary and third-party distribution networks.

Jefferies has a Buy rating with a $152 price target.

Bank of America Says Stocks Could Drop 40%: 5 Safe Large-Cap Dividend Stocks That Will Survive

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