Traditional defensive sectors now account for just over 10% of the S&P 500, down from 30% 25 years ago. Trivariate Research outlines the stocks that still meet dividend growth criteria.
The traditional playbook for dividend growth investors is breaking down. Defensive sectors – pharmaceuticals, telecoms, consumer staples, and utilities – now account for just over 10% of the S&P 500 market capitalization, down from nearly 30% 25 years ago, according to Trivariate Research founder Adam Parker in a recent report cited by CNBC. That structural shift creates a risk event for anyone relying on those sectors for steady payout growth and downside protection.
Parker wrote that the traditional defensive part of the market “has never been smaller.” Investors who once rotated into predictable revenue streams during volatility now face a thinner set of options. The risk is not a single-day crash but a gradual erosion of the dividend growth universe, forcing capital into less defensive names or lower yields.
The decline in defensive sector weight reflects a broader market transformation. Technology, communication services, and consumer discretionary have grown as a share of the index, driven by higher valuations and earnings growth. Defensive sectors, by contrast, have underperformed in both price appreciation and market-cap expansion.
Trivariate’s screening criteria highlight the challenge. The firm looked for stocks with at least five years of steady dividend growth, projected sales growth of 7% or more, and earnings growth of 10% or more. Those thresholds automatically exclude many traditional defensive names, which tend to have slower top-line growth. The pool of qualifying stocks is smaller than it was a decade ago.
Despite the narrowing universe, some companies still meet Trivariate’s bar. The source identifies several that have delivered strong dividend growth and recently reported developments that could sustain the trend.
Energy Transfer owns over 140,000 miles of pipelines and related infrastructure across 44 states. On May 14, Barclays raised its price target to $23 from $22, reiterating an Overweight rating, citing an “increasingly constructive backdrop” for U.S. crude production. The analyst said Energy Transfer “remains undervalued given fundamental tailwinds on multiple fronts.”
During the Q1 2026 earnings call, Co-CEO Thomas Long reported adjusted EBITDA of nearly $4.9 billion for the quarter and distributable cash flow of about $2.7 billion. The company raised its 2026 adjusted EBITDA guidance to a range of $18.2 billion to $18.6 billion and projected organic growth capital of $5.5 billion to $5.9 billion. Record volumes in midstream gathering, NGL fractionation, NGL exports, and crude oil transportation drove the quarter.
Risk to watch: Energy Transfer’s exposure to NGL markets and pipeline constraints in the Permian Basin could pressure volumes if crude production slows or regulatory hurdles emerge. The company’s high capital spending also raises execution risk.
On May 20, HUMAIN and Accenture announced a collaboration in Saudi Arabia, with Accenture serving as a strategic reinvention and AI partner. The partnership aims to move organizations beyond AI testing into production-grade systems. Accenture brings its experience in designing and managing AI-driven transformation, while HUMAIN provides a locally operated AI stack including data centers, cloud platforms, and advanced models.
Accenture employs approximately 786,000 people and works with major enterprises on digital transformation. The company’s dividend growth history and projected earnings growth of 10% align with Trivariate’s criteria.
Eli Lilly is a pharmaceutical company with a strong dividend growth track record. Its Alpha Score is 73/100, labeled Moderate, placing it in the Healthcare sector. The company’s pipeline in obesity and diabetes drugs supports the sales and earnings growth needed to sustain dividend increases. Pricing pressure and patent cliffs remain risks.
Applied Materials supplies semiconductor manufacturing equipment. Its Alpha Score is 68/100, labeled Moderate, in the Technology sector. The company benefits from AI-driven chip demand, which supports the 7% sales growth and 10% earnings growth thresholds. Dividend growth has been consistent. Cyclical semiconductor downturns could interrupt the pattern.
The defensive sector shrinkage is a multi-year structural trend, not a one-quarter event. The risk compounds as more capital chases fewer dividend growth names, potentially inflating valuations and reducing future returns.
Investors should assess their dividend growth exposure against the Trivariate framework. The firm’s criteria – five years of dividend growth, 7% sales growth, 10% earnings growth – provide a concrete screen. Names that fail any of those metrics may not offer the downside protection historically associated with dividend stocks.
Practical rule: If a stock’s dividend growth is strong but its revenue growth is below 7%, it may be a yield trap rather than a growth compounder. The combination of payout growth and top-line expansion is the key differentiator.
For traders building a watchlist, the stocks highlighted here – ET, ACN, LLY, and AMAT – represent the shrinking pool that still passes the screen. Each carries its own sector-specific risks, from Energy Transfer’s NGL exposure to Applied Materials’ cyclicality.
The structural shift in defensive sector weight will not reverse quickly. Dividend growth investors must decide whether to accept lower yields from a narrower set of names or expand into sectors that historically offered less stability. The Trivariate report provides a framework. The onus is on individual investors to stress-test their portfolios against the new reality.
For more on the energy infrastructure angle, see Energy Transfer's NGL Exposure Threatens Valuation Case and ET's Permian Pipeline Constraint Threatens AI-Linked Gas Thesis. For a broader view of commodity-driven dividend plays, visit the commodities analysis page.
AlphaScala data: LLY Alpha Score 73, ACN Alpha Score 44, AMAT Alpha Score 68. See individual stock pages for full analysis: LLY, ACN, AMAT.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.