Chaos Is Rocket Fuel for These 2 Stocks and Their Dividends

One thing is clear from the last few weeks: The geopolitical chaos never stops.

We contrarians get that. But the first-level crowd does not. When we’re hit with a war, snap tariffs or a pandemic (ugh!), most investors panic.

And the truth is, chaos—whether it’s war in Iran or fears that AI will erase whole industries—is coming at us faster than ever.

Most people think they can handle this wave of worry. But it pays to remember the famous Mike Tyson quote: “Everyone has a plan until they get punched in the face.”

True in life and investing. It’s just another way of saying that the same investors who think they can handle the latest “punch in the face” are often the first to turtle and sell low. That’s our “in.”

Volatility + the “Dividend Magnet” = Upside (and Payout Growth)

We contrarians know that market volatility (Latin for panic) is a tool. We look forward to panics like these because they let us build a growing income stream at a bargain.

While the mainstream crowd is seeing stars, we’re combing the market for stocks with two key things: Accelerating dividend growth and share prices that have fallen behind that payout growth.

These “lagging” dividend plays not only boost our income, but their rising payouts act like a “magnet” on their share prices. That’s because investors catch wind of the hike and bid the price higher in response.

The result: The stock rises to match the dividend, keeping the stock’s current yield relatively stable.

It’s one of the most reliable (and least-understood) patterns in investing, and I’ve seen it play out time and time again.

And we’ll put ourselves in an even better position if we can grab our stake while the share price is lagging the dividend’s growth. That way, we’re primed for some sweet bonus upside as the stock “snaps back.”

The best way to appreciate the punch this strategy packs is to see it in action. Let’s do that with two stocks from the portfolio of my Hidden Yields dividend-growth service. Both have fallen behind their Dividend Magnets—and look primed to bounce as a result.

“Dividend Magnet” Play No. 1: Allegion plc (ALLE)

Allegion (NYSE:ALLE) doesn’t fire up many investors’ imaginations—at least at first. For one, it yields just 1.3%. Second, it makes locks, including under its flagship Schlage banner. (“Boring!” yells the mainstream crowd.)

Let’s take that supposedly “low” yield first, because it masks something critical: In the last decade, this company has hiked its payout 359%.

So forget about 1.3%. Investors who bought back then are collecting about 3.4% on their original cost today. And these long-term ALLE holders can look forward to continued growth in their yield on cost as the dividend keeps marching higher.

Dividend Magnet? Check. Look at how the divvie has pulled the stock up in that time:

Allegion’s “Magnetized” Dividend …

The pattern is unmistakable. And look at the right side of that chart—you can see that Allegion’s stock has slipped behind the payout. Zeroing in on just the last five years gives us an even clearer snapshot of that gap:

… Gives Us Another “Lag” to Pounce On

This is clearly telling us now is a good time to buy, especially with a stock like Allegion, whose products sell well in any economy.

It’s also a “back-door” (sorry, couldn’t resist!) tech play through its focus on “smart” locks. If you’ve rented an Airbnb lately, you know that many homeowners are going with these so they can change access codes at will and avoid the hassle of often-lost keys.

The result: skyrocketing smart-lock demand. Recent figures from Fortune Business Insights say the market will grow at a 19.7% annualized clip from 2026 to 2034.

The stock returned 84% in Trump 1.0 and has already gained 24% in the first 13 months of Trump 2.0. I expect its performance to continue thanks to its resilient business and well-supported dividend: Over the last 12 months, the payout has accounted for just 26% of free cash flow.

That’s well below my 50% safety line. Add in rising revenue (up 9% in the latest quarter) and adjusted EPS (up just over 4%) and more payout hikes are a “lock.”

“Dividend Magnet” Play No. 2 Visa (V)

Our second stock is even more exciting than Allegion because it runs the “plumbing” of the global payment system, pumping 69.4 billion transactions through its network in just the last quarter.

That’s Visa (NYSE:V), which also tends to be overlooked because of its “low” 0.8% yield. Like Allegion, Visa’s business is resilient. And (excuse the mixed metaphor) its share price is even more of a coiled spring, thanks to its relentless Dividend Magnet:

Every Dip a Chance to Buy Cheap (and Another One Appears)

As you can see above, “Big V’s” dividend hasn’t just been growing—it’s been accelerating. The last hike, declared in October, was north of 13%. And if you look closely, you can see that every dip in that time has been a buying opportunity.

Which brings us to now, with the stock further off the dividend track than it’s been at any time in the last decade (and down 8% year-to-date). That’s ridiculous for a company that reported a 15% jump in adjusted EPS in its latest quarter, on a similar 15% jump in revenue. Payment volume soared 8%.

And despite the gloomy headlines, consumer spending is holding up, particularly among wealthier households. And the labor market remains stable.

A further tailwind? AI (of course!). AI isn’t just making Visa more efficient. It’s changing shopping habits, too, as more consumers use the tech to quickly find what they want. Sellers, too, can boost sales through hyper-focused ad targeting. That points to more traffic—and transaction fees—for Visa.

The bottom line? Both Visa and Allegion are sturdy businesses whose Dividend Magnets are piling upward pressure on their share prices. That makes now a great time to buy—before that “snap back” upside gets rolling.

Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement."