Guest Post by Tom Hutchinson, Chief Analyst, Cabot Dividend Investor
The S&P is up a staggering 95% since this bull market began in October of 2022. It’s up 128% this decade, for an average annual return of about 15%, which is 50% higher than the historical average.
The high returns are particularly impressive considering this decade has included a global pandemic, the highest inflation in 40 years, and the highest interest rates in 20 years.
If prognosticators saw those things coming in their crystal balls, they likely would have predicted a lousy market. But returns have been stellar for one dominant reason – technology.
The artificial intelligence catalyst is driving earnings growth through the roof in the market’s largest sector. The technology is real, and it provides a once-in-a-generation catalyst. Without technology, market returns for the past few years would be rather uninspired.
With that in mind, Sure Dividend has compiled a list of 130+ technology stocks complete with important investing metrics, which you can access below:
But the market has gotten pricey. According to The Wall Street Journal, the current S&P 500 price/earnings ratio is 25.63. That’s well above historical averages, and such lofty valuations have rarely been sustained in the past.
Of course, technology has never been such a huge part of the index. The “Magnificent 7” stocks plus Broadcom (AVGO) account for roughly 40% of the index. Those stocks currently trade at an average P/E ratio of 31 times. Nvidia (NVDA) accounts for about 8% of the index all by itself. For perspective, the entire energy sector accounts for less than 3% of the index.
If you take out the over-representation of technology, valuations aren’t that high. An equal-weight S&P 500 has a current P/E ratio of just 17 times. The huge technology weighting is what makes current valuations high by historical standards, and those high technology valuations are justified by higher earnings growth.
Will the AI boom continue in 2026? There is growing investor angst regarding the sustainability of technology valuations and whether all this massive AI investment will deliver tangible payoffs. Technology stock prices could continue to fall and drag the indexes lower. I believe the AI catalyst is real and still in the early stages. But technology could still have a tougher year in 2026.
Fortunately, there are a lot of stocks that aren’t technology. The rest of the market cares more about interest rates and the economy, and those things are shaping up well. The Fed is in a rate-cutting cycle, inflation is subdued, oil is cheap, and a higher level of economic growth is expected in 2026.
The rally is broadening, and 2026 may be a year for non-technology stocks to shine. Overall earnings are expected to grow 14% this year, with much of the growth over last year coming from other sectors. Many stocks in other industries sell at cheaper valuations than the market, and performance is improving as investors seek to diversify beyond technology.
Even if technology and the overall market flounder in 2026, several sectors could have a great year, maybe the best year of this decade so far. Notable sectors that are well positioned ahead of the new year include health care, financials, and utilities.
After a rough patch for most of 2025, health care is back and on a tear. Returns have blown away all other sectors over the past three months, and the momentum could continue. Earnings estimates have been rising in financials and utilities. Financial stocks benefit from a stronger economy and lower, or at least stable, interest rates. Utilities benefit from AI as electricity demand continues to soar.
The bull market has been lopsided toward technology so far. But 2026 is shaping up to be a year for other stocks to catch up. Here are some good ones to consider.
AbbVie Inc. (ABBV)
AbbVie is a U.S.-based biopharmaceutical company formed in 2013 as a spinoff from Abbott Laboratories (ABT). AbbVie is a research-based pharmaceutical company that specializes in small-molecule drugs. It’s a cutting-edge company with strong exposure to high-demand needs in immunology and oncology, and it has a terrific pipeline.
The company turned that corner from the patent expiration of its bestselling drug Humira. AbbVie has long planned for this eventuality and has done a stellar job launching new drugs capable of replacing the diminishing Humira revenue.
Humira accounted for 75% of revenue a few years ago. But new immunology drugs, Skyrizi and Rinvoq, together now have sales that already replace peak Humira revenues. In the most recent quarter, the two drugs had combined revenue of $6.9 billion, on pace to substantially outsell the best Humira year. AbbVie has also guided for the two drugs to bring in $40 billion by 2029.
While those drugs are killing it, AbbVie also has a robust pipeline of new drugs in the hopper, including important cutting-edge indications in the areas of blood cancer and Parkinson’s. In fact, there are currently 20 drugs in phase III, the final phase before approval. AbbVie also currently has over 50 drugs in earlier phases.
The company is officially moving past the Humira patent expiration that has held the stock back for years, despite a 169% return over the last five years. Imagine how ABBV could perform without a patent cliff and with growing sales.
Ally Financial Inc. (ALLY)
Ally Financial is the leading all-digital banking company in the U.S. with 3.3 million customers and over $100 billion in loans. The primary revenue source is automotive loans (over 70%), but they are also diversified in auto insurance, commercial lending, mortgage financing, and credit cards.
The company was the financial segment of General Motors (GM), where it developed into a 100-year-old, fully developed auto loan business. It was spun off in 2009 during the financial crisis as part of GM’s bankruptcy reorganization. The company has since focused on the online business.
The company is becoming very well established in the high-growth, online banking part of the industry. It focuses on this area more than established banks and may grow into a much bigger player in the years ahead.
ALLY has returned a solid 28% in the last year but is still well below the all-time high. It has momentum and is well positioned ahead of a year with likely improving macro fundamentals.
NextEra Energy, Inc. (NEE)
AI is transforming the utility sector as demand for electricity skyrockets to accommodate the massive needs of AI data centers. Rising demand is making electric utilities growth businesses as well.
The changing environment is adding another hugely positive dimension to these underrated stocks.
NextEra Energy (NEE) is the nation’s largest producer of renewable energy and the largest utility in the country. It should be in an ideal position to benefit going forward.
NEE has historically been a superstar performer for a utility. But it has stumbled in recent years as inflation and rising interest rates made utilities an out-of-favor sector. But things are changing. NEE has been trending higher since April.
NEE isn’t just some boring, stodgy utility stock with the possible benefit of good timing. It has a long track record of not only vastly outperforming the utility sector but the overall market as well. Prior to 2023, NEE’s total returns more than doubled those of the S&P 500 in the prior five- and 10-year periods.
NEE is two companies in one. It owns Florida Power and Light Company, which is one of the very best regulated utilities in the country, accounting for about 55% of revenues. It also owns NextEra Energy Resources, the world’s largest generator of renewable energy from wind and solar. It accounts for about 45% of earnings and provides a higher level of growth.
NextEra is the best of both worlds: defense and growth. There is also a huge runway for growth projects. NextEra has deployed over $50 billion in the last few years for growth expansions and acquisitions. It also has a large project backlog.
As the country’s largest producer of clean energy, NextEra has a huge advantage going forward. The skyrocketing growth in electricity demand is primarily driven by data centers and AI. Technology companies are highly carbon-conscious and will opt for clean energy alternatives whenever possible to reduce their carbon footprint.
Additional Resources
The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors:
The Dividend Aristocrats: S&P 500 stocks with 25+ years of consecutive dividend increases.
The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 56 stocks with 50+ years of consecutive dividend increases.
The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
Thanks for reading this article. Please send any feedback, corrections, or questions to [email protected].
