stock market

The highest-yielding dividend stocks have been sharp laggards on the year, with their yields failing to compensate for the underperformance

It hasn’t been a good year to be an investor in dividend stocks, especially when you consider that Treasuries currently are yielding above 5% out to one year.

“Investors deciding where to allocate funds are likely asking themselves, ‘What is the attractiveness of a low-growth stock paying 5% when the money can instead be parked in a “risk-free” Treasury yielding a similar amount?’” Bespoke Investment Group analysts wrote in a Thursday note. 

Indeed, high-yielding stocks have lagged so significantly this year that their juicy dividends aren’t enough to make up for the underperformance. As of Wednesday morning, the 101 S&P 500 SPX components that don’t pay dividends were up 20.7% on average on a year-to-date basis, while the 100 highest-yielding dividend payers in the index were down 3.2%, the Bespoke team highlighted.

Given a 17%-plus return for the S&P 500 ( so far this year, “anything down on the year is massively underperforming,” the analysts wrote. 

When narrowing on just the 29 stocks with the highest indicated dividend yields, all of which were at least 5%, Bespoke flagged even weaker relative performance. That bucket of names had seen a year-to-date average decline of 8.4% on the basis of total returns. The grouping lagged the S&P 500 over a three-year span as well, returning 21.6% versus a 39.5% return for the index. 

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