Latest / Dividend Investing with Fexingo: Income Stocks, Yield, and Long-Term Cash Flow Portfolios / How SpaceX IPO Shares Reshape Dividend Investors Portfolios
Transcript
- Lucas: So SpaceX goes public today, and if you're a dividend investor, you might think this has nothing to do with you. But I think it actually raises a really interesting question about portfolio construction. Luna: Yeah, because suddenly every retail investor who got an allocation is sitting on a stock that's up huge, and they have to decide: hold or sell? Lucas: Exactly. And that decision is essentially a question about opportunity cost. If you hold SpaceX, you're forgoing the income you could get from a dividend payer. And in this environment, that income is pretty attractive. Luna: Let's put some numbers on it. Verizon is yielding over 5% right now, and it's up 2.8% in the last five days. Realty Income, the triple-net lease REIT, yields about 5.6% and it's up 1.5% over the same period. Lucas: Right. So you've got these steady income streams yielding 5% or more, and then you've got SpaceX, which doesn't pay a dividend and probably won't for years. The trade-off is: do you want the potential for capital appreciation, or do you want the cash flow? Luna: And that's not even a rhetorical question. I think a lot of dividend investors are trained to just say 'income is king,' but if you look at Ron Baron — he bought another $1 billion of SpaceX in the IPO, bringing his total stake to $25 billion. He's clearly betting on massive appreciation. Lucas: Baron is a long-term growth investor, not a dividend guy. But for the typical dividend investor listening, the question is whether a small allocation to a high-growth name like SpaceX makes sense as a complement to a core income portfolio. I think it can, as long as you're intentional about sizing. Luna: What would intentional sizing look like? Like, what percentage of a portfolio should be in something like SpaceX? Lucas: I've seen a lot of advisors suggest no more than 5% to 10% in any single high-growth position, especially one that's pre-revenue or has an uncertain earnings path. SpaceX is a special case because it's already profitable in some segments, but the point stands — you don't want to bet the farm. Luna: And if you do sell some SpaceX, where does that cash go? Back into dividend stocks? That's the natural move for this audience. Lucas: Yeah, I think so. Look at the market right now — the S&P 500 is at 7,554, up 2.3% in the last five days. The Dow is at 51,671. There's a lot of optimism baked in. But dividend stocks like Verizon, Realty Income, even Procter & Gamble at $150 with a 1.2% weekly gain — they offer a ballast. Luna: Let's talk about that word 'ballast.' Because if you look at the yield curve, it's still inverted — the 10-year Treasury is yielding 4.48%, the 2-year is at 4.09%. That spread of 39 basis points is down from 40 last week. So the curve is steepening slightly, but it's still inverted. Lucas: And that's relevant because an inverted yield curve historically signals recession fears. Dividend stocks tend to outperform in those environments because investors crave income stability. So if you're sitting on a huge SpaceX gain, the case for rotating some of that into dividend payers is pretty strong. Luna: But there's also a case for holding SpaceX — it could be the next Apple or Amazon. I mean, Baron thinks it could be worth $500 billion eventually. Lucas: Sure, and he might be right. But the key is that dividend investors should have a framework for making that decision. One framework I like is to ask: does this holding help me sleep at night? If a SpaceX position is causing anxiety because it's volatile and doesn't pay income, then maybe it's not right for your portfolio. Luna: That's a good rule of thumb. And the data backs it up — dividend growers have historically provided better risk-adjusted returns over long periods. So even if you miss out on some SpaceX upside, you're getting something valuable in return. Lucas: Exactly. And speaking of something valuable in return, I want to mention something quickly. You know, we keep this show ad-free, and that's intentional. We want the conversations to be about what's actually useful for you, not about selling products. If you find value in that, and you want to help us keep it going, you can support the show at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to say thanks if the show has helped you think about a decision differently. And it really does help us keep doing what we're doing. Lucas: Alright, back to SpaceX and dividends. So let's say you decide to hold some SpaceX — how do you integrate that into a dividend portfolio? Do you just let it sit and grow, or do you actively rebalance? Luna: I think active rebalancing is key. If SpaceX becomes 20% of your portfolio because it triples, you might want to trim it back to 5% or 10% and put the proceeds into something like SCHD or VYM. Those ETFs are up 0.7% and 1.0% in the last five days respectively. Lucas: And that's the disciplined approach. It's not about timing the top — it's about managing risk. Because if SpaceX ever does cut its dividend, or rather, if it never starts paying one, you want to make sure you're not overexposed to a single story. Luna: Right. And for investors who are strictly income-focused, there's no shame in selling the entire SpaceX position and putting it all into dividend stocks. You're already getting a 5% yield from Verizon, which is pretty hard to beat in this rate environment. Lucas: And don't forget, Verizon's dividend has been growing for years. It's not just the yield — it's the growth. Same with Realty Income, which has increased its dividend for over 50 consecutive years. That kind of reliability is hard to find in a growth stock. Luna: So to sum up: SpaceX IPO creates a real decision for dividend investors. You can hold for growth potential, sell for income, or do a mix. The important thing is to have a plan. Lucas: And to think about opportunity cost in terms of both income and total return. There's no one right answer, but being intentional about it is what separates a good portfolio from a great one.