Is AT&T the Best Defensive Stock Against a 2017 Market Correction?

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Now that we basically are one-third of the way through 2017, one amazing trend is that this eight-year-old bull market continues to rage on. Despite a weaker-than-expected gross domestic product report and weaker durable goods report this week, investors have continues to line up and buy the stock market pullbacks without fail. Even with the president’s pro-growth policies not yet implemented, equity investors have not see any of the major gains since the election get taken away.

Stocks have risen well over 200% from their V-bottom lows in March of 2009. For investors who have been in the markets for decades, it is no secret that markets can change quickly. In fact, many sell-offs and mini-bear markets can come on without warning. Some sell-offs come out of thin air for reasons that most investors had not considered at the time. Maybe it is time for investors to reconsider all the growth-chasing in favor of some of the safer dividend-paying stocks that are highly defensive stocks.

24/7 Wall St. recently screened out eight defensive stocks targeted specifically toward the summer of 2017. As the summer approaches, many investors fear that a stock market correction could come at almost any time. Of the eight defensive stocks outlined for the summer of 2017, AT&T Inc. (NYSE: T) has held up better than some expected after rival Verizon Communications Inc. (NYSE: VZ) reported earnings.

Is it possible that AT&T is the best defensive stock for the summer of 2017? It was the highest dividend yield of the eight stocks, yielding almost 5%. While there is a four-way wireless war among Verizon, AT&T, T-Mobile and Sprint, it was AT&T that came out on top, even though AT&T shares have, according to FINVIZ, underperformed the broader market:

  • On the last trading day of April, the Dow Jones Industrial Average was up almost 2% for the week, up about 1.5% for the month, and up almost 7% so far in 2017.
  • AT&T was down 1% for the week, versus a drop of over 3.5% for Verizon. AT&T was down 2.8% over the past month, but less than the 4.2% drop for Verizon. And for a year-to-date run, AT&T’s 4.0% drop was less than the 10.5% drop seen in Verizon shares.

Many investors only care absolute returns. It makes sense on the surface, because no investors like to lose money. This begins to change when it comes to defensive stocks because many investors look at these as a “chicken bull” way to play the stock market. Dividends and stock safety may suddenly become much more important than chasing the broader risk that the stock market as a whole takes on.

When it comes to AT&T, it feels like the sell-off from its highs of 2016 may offer at least some cover for investors who might worry about a stock market sell-off. We have yet to hear much about “sell in May and go away” as an investor mantra in 2017, but then again we try to get you thinking about things ahead time rather than just trying to figure out how to react once an event comes into play. And then there are the summer doldrums to consider.