In this market, there are several “overlooked gems” that provide good opportunities — and pay dividends, according to ClearBridge Investments’ Michael Clarfeld. Stocks have been volatile this summer, with artificial-intelligence companies swinging up and down, depending on shifting investor views of infrastructure spending. Treasury yields have also weighed on stocks, with the 30-year bond yield climbing to a 19-year high last week before dipping back down. Yields declined on Monday after CNBC reported the Treasury Department could use its General Account to help fund increased purchases of government bonds. Despite the rocky summer, though, the market remains near their all-time highs. The S & P 500 closed at a new record of 7,798.99 on Aug. 13. And while there have been some periods when the bull market has broadened out to include more stocks, the market remains heavily concentrated in mega-cap technology companies. “The longer these things go on, like this market concentration and momentum, we get lulled into losing our perspective on how extreme the situation is,” said Clarfeld, portfolio manager in charge of ClearBridge’s dividend strategy. The funds he manages include ClearBridge Dividend Strategy Fund (SOPAX) and Franklin ClearBridge Enhanced Income ETF (YLDE). The former, rated four stars by Morningstar , yields 1.96% and has a 1% expense ratio. The latter boasts a 1.93% yield and 0.48% expense ratio. So far this year, both are slightly underperforming the S & P 500, which yields 1.02%. SOPAX YTD mountain ClearBridge Dividend Strategy Fund year to date Historical data shows that periods of narrow, momentum-driven markets are typically followed by periods of broader market participation — when dividend-growth portfolios excel, Clarfeld noted. ‘Pretty terrific opportunities’ Clarfeld isn’t predicting an immediate shift away from the current market environment, or that investors shouldn’t own tech. But he believes investors should be aware of risk and stay diversified. In the meantime, there are stocks that are going unnoticed by many investors right now, he said. “People are so myopically focused on things to do with AI that they’re overlooking things in other areas, and it’s really creating some pretty terrific opportunities,” Clarfeld said. He breaks it down into two areas: “pedestrian” companies that are high-quality businesses and “tangential” names that have been taken down during the concerns over the disruptive effect of AI on software . Two unexciting names Clarfeld likes are The Williams Companies and Unilever , which yield 2.98% and 3.46%, respectively. One of the largest natural gas pipeline companies in the country, Williams is a business not particularly commodity sensitive, he said. It is the second largest position in SOPAX, at 4.05% as of July 31. “We have been seeing a big growth in natural gas production and natural gas infrastructure for 15 years because of the shale boom and renaissance, and then it has gotten turbocharged over the last year or two as the energy demands are going surging with AI and data centers,” Clarfeld said. WMB YTD mountain The Williams Companies year to date On top of that, Williams has developed custom power solutions, its balance sheet is in good shape and it is growing earnings and cash flow, he said. Clarfeld sees “phenomenal growth” ahead for many years because of the need for data center power. Williams has an average analyst rating of overweight and 21% upside to the average price target, according to FactSet. Shares are up about 18% year to date. His other pick, U.K.-based Unilever, a global maker of consumer staples ranging from Dove soap to Hellmann’s mayonnaise, is executing well, Clarfeld said. “They’re growing in an industry or a sector where volume growth has been tougher to come by,” he said. “They’ve been having robust organic volume growth.” UL YTD mountain Unilever year to date Unilever makes up 2.67% of SOPAX. The stock has an average analyst rating of overweight and 11% upside to the average price target, according to FactSet. Shares are down fractionally year to date. Lastly, a third name Clarfeld likes is Automatic Data Processing , which took a hit earlier this year but has since rebounded. ADP, which offers a 2.42% dividend yield, uses software to process payrolls, he noted. ADP YTD mountain ADP year to date “When you think about businesses that are likely to be disintermediated by AI, payrolls would seem like it’s one of the last of them,” Clarfeld said. “It’s very mission critical.” ADP makes up 2.3% of SOPAX. It has an average analyst rating of hold and 2% upside to the average price target, according to FactSet. Other top holdings in the ClearBridge Dividend Strategy Fund include ExxonMobil , Microsoft , Alphabet , Apollo Global Management and Marsh & McLennan .

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