The charm of high dividends is fully revealed! Telecom stocks transform into "digital government bonds" becoming a new safe haven amid the turbulence in US stocks.

Against the background of the uncertain economic situation and escalating political risks of GEO Group Inc, investors have poured into the tech sector's most favored safe-haven assets - high dividend telecom stocks. After a bleak 2025, the telecom sector has become one of the best performing sectors in the S&P 500 index this year, with a cumulative gain of 9.6%, while the overall market index fell by 3.3%. Verizon Communication Inc. (VZ.US) saw its stock price rise by over 19% in 2026, and AT&T Inc. (T.US) also had a gain of 13%. Meanwhile, the Nasdaq 100 index entered a correction phase in March, with an index tracking the "FANG" stocks falling 13% from its peak in October last year. Sergey Dluzhevskiy, portfolio manager at Gabelli Funds, said the reason behind this divergence is quite simple. As economic uncertainties grow, investors are valuing predictability in cash flow and above-average dividend yields more, and telecom stocks happen to meet these needs. Dluzhevskiy said: "Market funds are shifting from some tech stocks and general AI trading to more defensive sectors." The dividend yield of the S&P 500 communication services sector index is 4.3%, roughly equivalent to the yield on the 10-year US Treasury bond - which fell below 4% in late February and early March. Specifically, Verizon has a dividend yield of 5.6%, and Comcast Corporation Class A (CMCSA.US) has a dividend yield of 4.8%. Randy Hare, portfolio manager at Huntington National Bank, said: "When bond yields decline, high dividend stocks become attractive. The performance of those dividend aristocrat stocks is surpassing the overall market." Dividend stocks are favored by investors concerned about future growth, as they seek to protect their portfolios by obtaining predictable returns in times of market volatility. This trend is being driven by the current market sentiment, triggered by the turmoil caused by the conflict in Iran and concerns about the billions of dollars invested by large tech companies in building AI infrastructure - which supports many industries and stocks. If capital expenditure slows down, these sectors could come under pressure. Bill Mann, Chief Investment Officer and Portfolio Manager at Motley Fool Wealth Management, said: "In a time of uncertainty about growth - which I think we clearly saw in 2026 - people are starting to pay attention to downside risk protection." Therefore, dividends have "naturally become attractive to investors." This year, Verizon's stock price has led the telecom sector, surging 23% in the first quarter, its best quarterly performance since 2010, after falling 7.3% in the fourth quarter of 2025. This upsurge started in January when the company announced its largest increase in the number of mobile phone users in seven years and expanded its stock buyback program for the next three years to $25 billion. AT&T's stock price also rose significantly after releasing better-than-expected financial reports. Even among large telecom stocks that didn't see price increases in 2026, their performance was better than the broader market. T-Mobile US Inc. (TMUS.US) saw its stock price fall by 1.2% this year, while Comcast Corporation Class A stock fell by 0.8%, both outperforming the S&P 500 index and Nasdaq 100 index. Additionally, these stocks provide stable dividend yields - Comcast Corporation Class A at around 4.8%, and T-Mobile at 1.9%. Telecom companies are also part of the popular HALO (High Asset, Low Obsolescence) trading. Their assets, such as fiber optic cables, base stations, and data centers, have enduring value in the evolving economic environment. In other words, while they are also investing in AI for internal operations, customer service, and network performance, they are less affected by the AI race compared to other areas of the tech industry. Hare said: "You can't replace fiber optic cables with AI." While dividend stocks may not bring as high market returns as recent memory and storage stocks, they can provide a certain level of protection when the market falls. For telecom companies, they have reliable businesses that provide essential services to American consumers. Dluzhevskiy of Gabelli said: "I think the pandemic has proven and truly highlighted the importance of silicon-based networks and widespread digital infrastructure, as well as the value of interconnectedness in today's economy. In times of economic recession, people may cut back on other expenses, but they will keep wireless and broadband services. I believe these factors are collectively driving the strong performance of the telecom sector."