Latest / Dividend Investing with Fexingo: Income Stocks, Yield, and Long-Term Cash Flow Portfolios / How Samsung Dividends Outperform When the Yield Curve Steepens
Transcript
- Lucas: So the dividend landscape right now is really a story of two worlds. On one side you have classic US dividend stalwarts like Procter & Gamble, Coca-Cola, Johnson & Johnson — all down over the past week. PG dropped 3 percent, KO fell 1.8 percent, JNJ off 1.5 percent. Luna: And that's despite the S&P 500 being up 0.8 percent over the same period. The dividend stocks are actually lagging. Lucas: Exactly. Meanwhile, the Nasdaq is up 1.4 percent. And in that tech-driven rally, there's one dividend payer that's been quietly crushing it: Samsung Electronics. Luna: Samsung? The Korean tech giant? They pay a dividend? Lucas: They do, and it's actually pretty meaningful. Samsung currently yields about 3.2 percent — that's competitive with the S&P 500 dividend average. But here's the kicker: over the past five years, Samsung has grown its dividend at a compound annual growth rate of roughly 12 percent. Luna: That's more than double the dividend growth rate of most US consumer staples. Procter & Gamble is more like 5 or 6 percent annual growth. Lucas: Right. And when you look at why Samsung's stock is holding up better — its shares are actually up about 2 percent over the past week — you have to understand the dual engine. On one side, you've got a growing dividend that's supported by a payout ratio around 30 to 35 percent, so plenty of room to keep raising. Luna: That's conservative. Most US dividend payers are closer to 50 or 60 percent payout. Lucas: And on the other side, Samsung's core business — memory chips and semiconductors — is deeply cyclical. When the economy is doing okay and AI demand is driving chip orders, Samsung's earnings get a huge boost. That's what we're seeing now. Luna: So the dividend growth is almost like a floor, but the earnings upside is a ceiling that keeps rising. Lucas: Exactly. Compare that to a stock like Coca-Cola. KO has a great dividend, 3.1 percent yield, but its revenue growth is essentially tied to global soda consumption — maybe 3 to 4 percent a year. There's no cyclical kicker. So when bond yields rise — the 10-year Treasury just hit 4.56 percent — investors start comparing that 3 percent yield to a risk-free 4.56 percent, and they sell. Luna: Samsung's yield is also 3.2 percent, but its growth story makes it more like a bond with an escalating coupon. Lucas: That's a great way to frame it. And it's exactly why dividend investors need to look beyond the yield number. A 3 percent yield on a stock that grows its dividend 12 percent a year is much more attractive than a 3 percent yield on a stock that grows 5 percent, especially in a rising rate environment. Luna: And the steepening yield curve we're seeing right now — the spread between 10-year and 2-year Treasuries has widened to 38 basis points — that typically hurts stocks that are viewed as bond proxies. Utilities, REITs, consumer staples. But it can benefit stocks with pricing power and growth. Lucas: Right. And Samsung isn't alone. There are other non us dividend payers with similar profiles — TSMC in Taiwan, ASML in the Netherlands — but Samsung is probably the most accessible for US investors via an ADR or an ETF that holds it. Luna: But isn't there currency risk? The Korean won versus the dollar. Lucas: There is. Over the past year, the won has weakened about 4 percent against the dollar. That's a real drag if you're a US investor. But Samsung's dividend growth has more than compensated. And if the Fed eventually cuts rates, the won could strengthen, giving you a double benefit. Luna: So for dividend investors who are feeling the pinch from rising bond yields, Samsung offers a way to stay in equities but with a growth tilt. Lucas: Exactly. And I think the key lesson is: don't just look at the yield. Look at the dividend growth rate, the payout ratio, and the underlying business cycle. A stock like Samsung sits at the intersection of all three. Luna: It's a reminder that dividend investing isn't just about collecting checks. It's about total return. Lucas: And that's why we keep coming back to these conversations — because the landscape is always shifting. If you find this kind of analysis useful, and you want to help keep the show ad-free and independent, you can support us at buy me a coffee dot com slash fexingo. Luna: Yeah, we really appreciate it. Every bit helps us keep digging into these specific cases. Lucas: So to close: if you're building a dividend portfolio for the long term, don't auto-pilot into the usual US staples. Consider adding a name like Samsung — or its equivalent in other regions — where dividend growth and business cyclically align. Luna: And check your own portfolio. Are your dividend stocks growing their payouts faster than bond yields are rising? If not, it might be time to rebalance. Lucas: Great note to end on. We'll be back next time with another deep dive into the income side of the market.