A Reminder to Tune Out the Noise in Frenzied Markets
Staying focused and patient in an AI-obsessed market can pay off over time.
There’s a fable about a man who only came to town once a year from his home up in the wild hills. He would stop by the stockbroker’s office and buy one or two good, cheap stocks each year. Maybe he also sold something for a high price — maybe he didn’t sell anything.
Then he never checked the prices again until he came back the next year. As the story goes, that man produced the best long-run returns the broker had ever witnessed.
Today, the man in the hills would have online access to his brokerage account. He would get emails or phone notifications nudging him to buy cryptocurrencies — which brokers happen to earn high fees on. He’d quite likely have access to CNBC, which seems designed to prompt action with “fast money” trades and countdown clocks.
If he avoided all temptation and stuck to his strategy of buying one or two cheap stocks a year, it’s unlikely in the current environment anybody would ever tell fables about him, at least not the way things have been going. Good, cheap stocks simply haven’t generated the same returns that the broader market has.
Over the past five years, the S&P 500 has returned more than 80% (as of early May 2026). The NASDAQ is up more than 100%. In contrast, dividend exchange-traded funds (ETFs) have generally returned 30%-50% over that period. Even the more august Dow 30 index has done better than that.
The main reason for the recent shortfall is that the all-consuming Artificial Intelligence (AI) theme has tended to miss the dividend payors.
There are exceptions. Caterpillar (CAT) has risen fourfold, underpinned by demand for vehicles to construct data centers and mining equipment (gold, not bitcoin). The run-up has pushed its yield well below 1%.
Last year at this time, industrial glass maker, Corning (GLW) (covered in the Dividend Informer), was priced to yield a respectable 2.2%, bolstered by steady share count reductions generally running about 1% per year. Now fiber optic connections have been revealed as a bottleneck in the AI ecosystem, and Corning shares have tripled. The yield has fallen apace.
But those are exceptional cases. Dividend investors tend to own a disproportionate number of banks, energy producers, consumer staples, and pharmaceutical companies, not the stuff dreams are made of. As such, they’re mostly making do with historically average returns despite the typically fabulous overall market. That’s called being left in the dust, and it doesn’t feel great.
Dividend returns have actually been fine by historical standards. It’s just frustrating to miss out on the extra gains that have accrued to more growth-oriented investors. Adding to the frustration, the narrative around the stock market is always changing to flatter whatever has been working recently. The go-go bull market in growth stocks has shifted popular attitudes. It has turned the old truism of “buy low, sell high” inside out. Nobody says that anymore. It sounds quaint. The fashion now is to say, “Personally, my mantra is buy high, sell even higher.” Try to sound as smug as possible when saying it. You don’t have to pretend you invented it, but don’t pretend you didn’t either. Let people draw their own conclusions.
Dividend investors typically build their portfolios for reliable cashflows and, hopefully, conservative downside in the notoriously uncertain stock market.
Constancy. Regularity. Patience. These are some of the dividend investor’s best friends, and the payoff tends to be something like inflation plus 5%-6% per year. If other people are making more, then good for them.
Play your own game and ignore what others do. Yeah, they could shut up about it, but it’s no skin off your nose. You can always turn off CNBC and retire to your own spiritual equivalent of the hills.
About Dividend Informer
Dividend Informer delivers regular research and analysis on securities which provide a combination of income and long-term appreciation, aiming to reduce volatility while still delivering adequate investment returns. Each month, our professional stock analysts publish detailed, high-quality, income-oriented stock ideas for subscribers. These in-depth research reports are exclusive to the Dividend Informer newsletter.
In Dividend Informer you will discover actionable opportunities for your portfolio, through investing in growing companies with a track record of offering regular, increasing capital return in addition to potential for share price growth.
Our focus is on reasonably-valued companies with solid balance sheets and significant free cash flow generation, allowing for the payment of consistent, growing dividends.
A heavy emphasis is placed on dividend yield, of course, but the newsletter is not focused on current income but long-term total return. Often we highlight companies returning significant capital to shareholders via share repurchases and debt reduction.