Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / How Dividend Aristocrats Are Getting Dethroned in June 2026
Transcript
- Lucas: The S&P 500 is sitting at 7,400 as of today, June 23rd, up about 16 percent year to date. But there's a pocket of the market that's been dragging its feet — the Dividend Aristocrats. These are the 66 companies in the S&P 500 that have raised their dividends for at least 25 consecutive years. And they are not keeping up. Luna: That's surprising because in a bull market you'd think steady income stocks would get bid up too. What's the gap? Lucas: Year to date, the Aristocrats index has returned roughly 9 percent. That's a solid number in absolute terms, but it's about 7 percentage points behind the S&P 500. And over the past month, as small caps surged — the Russell 2000 is up nearly 2 percent in the last five days alone — the Aristocrats actually edged lower. Luna: So the bull market is rotating away from the very stocks that are supposed to be the bedrock of a conservative portfolio. Who's the poster child for this lag? Lucas: Let's look at Coca-Cola. It's been an Aristocrat for decades. But its five-year dividend growth rate has slipped below 2.5 percent. The yield is still decent, around 3.1 percent, but earnings per share growth has been flat to negative in recent quarters. The stock is up maybe 4 percent year to date. Meanwhile, a growth name like NVIDIA has returned over 30 percent. Luna: Right, but Coca-Cola isn't supposed to be NVIDIA. The whole point of an Aristocrat is stability, not sprinting. The question is whether that stability is still worth the trade-off when the bull market is rewarding risk. Lucas: Exactly. And that's the tension. The Aristocrats are concentrated in consumer staples, utilities, and industrials — sectors that are out of favor right now. Utilities are down about 3 percent over the past month because interest rates haven't fallen as fast as people hoped. The Fed funds rate is still at 3.63 percent. Higher rates make the yields on these stocks less attractive relative to bonds. Luna: And yet, some newer names have joined the Aristocrats club — Microsoft became one in 2020, Apple in 2022. But those stocks trade more like tech growth. Microsoft's dividend yield is barely 0.8 percent. So the label is starting to mean different things for different companies. Lucas: That's a key point. The Aristocrats index is equal-weight, so a stock like Microsoft has the same influence as Coca-Cola. But the market is valuing them completely differently. Microsoft's earnings per share grew 20 percent last year. Coca-Cola's grew maybe 4 percent. Luna: So maybe the Aristocrats label used to signal safety and steady income. But in this bull market, safety is being redefined as growth with a side of dividend. Lucas: That's a great way to put it. And it gets to something we talk about a lot on this show — that the bull market is forcing investors to rethink their assumptions. If today was actually useful to you, the way these episodes stay ad-free is listener support. You can buy me a coffee at buy me a coffee dot com slash fexingo. That's what keeps this conversation independent. Luna: Yeah, it's a small gesture that goes a long way. And it helps us keep digging into these kinds of stories without any outside noise. Lucas: So back to the Aristocrats — let's talk about the ones that might actually be at risk of losing their streak. Procter & Gamble has raised its dividend for 65 consecutive years. But its payout ratio has crept up to almost 70 percent. That's not alarming, but it leaves less room for future growth. Luna: And then there's ExxonMobil. It was an Aristocrat until it cut its dividend in 2020 during the oil crash. It's been reinstated, but that shows the label isn't permanent. In a bull market, some companies get tempted to invest more in buybacks or M&A instead of raising the dividend. Lucas: Right. And the data shows that over the past five years, the Aristocrats have actually underperformed the S&P 500 by about 2 percent annualized. That's a significant gap. So for a long-term investor, holding the Aristocrats has meant sacrificing total return for dividend consistency. Luna: But there's a counterargument — during a bear market, these stocks hold up better. So maybe the right time to buy them is when everyone is running for cover, not when the bull is charging. Lucas: That's historically true. In 2022, when the S&P 500 fell 19 percent, the Aristocrats fell only 10 percent. They did their job. But the question for today is: if you're building a portfolio in mid-2026, do you want to overweight a group that's been lagging in the rally, on the assumption that a downturn is coming? Luna: And the Fed doesn't seem to be cutting anytime soon. The funds rate is flat at 3.63. So the yield competition from bonds is still real. Lucas: Let's pull up one more data point. The Consumer Staples Select Sector SPDR Fund, ticker X-L-P, is down about 1 percent over the past week. The S&P 500 is down 1.5 percent over the same period. So they're actually holding up slightly better in this five-day pullback. But the year-to-date story is still clear — this is a growth-led bull market. Luna: So what's the takeaway for someone who likes dividends but wants to stay in the game? Lucas: I think the smart play is to not treat the Aristocrats label as a buy signal on its own. Look at the underlying business. A company like Lowe's, which is an Aristocrat, has a payout ratio under 40 percent and earnings growth around 8 percent. That's a different profile than a utility with a 70 percent payout ratio and zero growth. Luna: So it's back to fundamentals. The label is a starting point, not the finish line. Lucas: Exactly. And in this bull market, the markets are forcing that discipline. October 2026 is still four months away. We'll see if the rotation back into defensives happens before then or if the growth story keeps running. Luna: And we'll keep watching the Aristocrats — but with a more critical eye. Lucas: That's all for this episode of Bull Market Conversations. We'll be back next time with another angle on what's really driving this market.