Latest / Dividend Investing with Fexingo: Income Stocks, Yield, and Long-Term Cash Flow Portfolios / Why Dividend Stocks Are Outpacing Growth in June 2026
Transcript
- Lucas: So it's late June, the Nasdaq is down about two percent over the past five trading days, but look at the Dow — up nearly a percent. And the Russell 2000, up over two percent. That's a pretty clear rotation happening under the surface. Luna: Yeah, and the dividend ETFs are telling the same story. DVY, the iShares Select Dividend ETF, is up one point four percent in that same window. Realty Income, ticker O, up over two percent. Meanwhile, the S&P 500 itself is down eight-tenths of a percent. Lucas: Right. So the question is: what's driving this? I think the answer starts with the yield curve. The ten-year Treasury yield is at four point five zero percent, the two-year at four point one six. That spread — thirty-four basis points — has widened from twenty-seven basis points just a few days ago. Luna: A steepening curve. Historically, that's been a tailwind for dividend stocks, especially the more defensive ones, because it signals confidence in the economy without triggering the inflation panic that would push rates much higher. Lucas: Exactly. And when the curve steepens like this, growth stocks — particularly the high-multiple tech names that dominate the Nasdaq — tend to get repriced. Their future cash flows get discounted at a higher rate, so their present value drops. Dividend stocks, on the other hand, have cash flows that are more immediate and more predictable. Luna: Plus, you have the Fed holding rates steady at three point six three percent. The effective federal funds rate hasn't budged since May. That takes some of the fear out of the market. If the Fed isn't hiking, then dividend stocks with yields above four percent start to look pretty attractive relative to cash. Lucas: Especially when the three-month Treasury is yielding three point eight five percent. You get a little more from a quality dividend payer, plus the potential for capital appreciation. But the key word there is 'quality.' Not all dividend stocks are created equal. Luna: Take Altria, for instance. Up four point five percent in the past five days. That's a big move for a tobacco stock. What's going on there? Lucas: Altria's yield has been above seven percent for a while, so it's been a high-yield play. But the stock has been under pressure for years due to declining cigarette volumes. The move this week seems tied to a broader rotation into deep-value, high-yield names, plus maybe some relief that regulatory threats haven't materialized as aggressively as some feared. Luna: So the market is basically saying: I'll take that seven percent yield if the curve is steepening and the economy is stable enough to support it. Lucas: Exactly. And compare that to a stock like Verizon, which is yielding around five and a half percent. Verizon is actually down slightly over the past five days, down three-tenths of a percent. So there's a nuance here — it's not just any high yielder. It's about which sectors are benefiting from the macro backdrop. Luna: Verizon is more of a bond proxy. When the ten-year yield is at four point five, a five and a half percent yield isn't as compelling. But Altria has that extra cushion. And Realty Income, which is a triple-net lease REIT, is up two point three percent. Its yield is around five point five as well, but it has a different risk profile. Lucas: Realty Income is interesting because it's a REIT, and REITs have been out of favor for much of the past two years with rates rising. But now that rates seem to have stabilized, the dividend growth story for O is back in focus. They've increased their dividend for over twenty-five years, and the occupancy rates are strong. Luna: So the rotation we're seeing is partly about rates, but also about earnings visibility. The companies that can actually grow their dividends in this environment are being rewarded. Lucas: Right. And that's why the dividend aristocrats — the S&P 500 companies that have raised dividends for at least twenty-five consecutive years — tend to hold up well in these periods. We've talked about them before, but the data this week reinforces that. The ProShares S&P 500 Dividend Aristocrats ETF, ticker NOBL, is flat to slightly positive while the broad market is down. Luna: What about the Dividend Appreciation ETF, ticker VIG? That one focuses on dividend growth rather than high yield. Lucas: VIG is actually up a bit too. That ETF holds companies like Microsoft and Procter & Gamble. Microsoft is a growth company that also pays a dividend, and it's not as rate-sensitive as some of the pure growth names. P&G is a consumer staple, very defensive. So that fund is benefiting from the same rotation. Luna: But not all dividend funds are created equal either. The Vanguard High Dividend Yield ETF, VYM, is down a tenth of a percent over five days. Not a huge loss, but it's not outperforming. Lucas: Right, VYM is more yield-oriented and includes some energy and financials that might be under pressure. Energy stocks have been mixed, and financials are still digesting the new capital rules the Fed proposed this week. You saw that headline about banks being able to withstand seven hundred billion dollars in losses. That's a lot, but the market is still figuring out what it means for profitability. Luna: So for an individual investor trying to navigate this, what's the takeaway? Should they be shifting more into dividend stocks right now? Lucas: I think the takeaway is to look at the yield curve and the Fed's posture. If the curve continues to steepen and the Fed stays on hold, dividend stocks with sustainable payout ratios and a history of growth should continue to attract flows. But don't just buy the highest yield. Look at the business model, the free cash flow, and the dividend coverage ratio. Luna: And maybe avoid the trap of reaching for yield in sectors that are structurally challenged, like some legacy telecoms or tobacco, unless you really understand the risks. Lucas: Exactly. Altria worked this week, but it's a volatile stock. Realty Income is steadier but still interest-rate sensitive. The key is to match the investment to your own risk tolerance and income needs. Luna: You know, Lucas, this kind of conversation is exactly why people listen to our show. We talk about real money decisions — not just theory, but what's actually happening in the market right now. Lucas: And we try to keep it ad-free so that the conversation stays focused on what matters to our listeners. If you find value in these episodes, one way to support the show is by buying us a coffee. It's a small gesture, but it really helps keep the podcast independent and free for everyone. Luna: Yeah, it's at buy me a coffee dot com slash fexingo. No pressure, but if our discussions have helped you think about your portfolio differently, it's a nice way to say thanks. Lucas: That's right. And now back to the numbers — because I want to talk about one more ETF that's been quietly crushing it. Luna: Which one? Lucas: The Schwab U.S. Dividend Equity ETF, ticker SCHD. It's down seven-tenths of a percent over five days, which is roughly in line with the S&P 500. But year-to-date, it's up around six percent. That's a solid return for a dividend fund, and it shows that the long-term compounding story is intact even when short-term rotations cause some wobbles. Luna: SCHD has a yield around three and a half percent, so it's not the highest, but the dividend growth has been strong. And its screening methodology favors companies with financial strength and sustainable dividends. Lucas: Right. It's a good example of a fund that balances yield and growth. And if the economy stays on this path — moderate growth, steady rates, steepening curve — that kind of fund should do well. Luna: So overall, the message for June 2026 is: dividends are back in vogue, but selectivity matters more than ever. Lucas: Absolutely. The market is rewarding quality, and that's a theme we'll keep watching as we head into the second half of the year.