A tough year for dividend stocks puts lots of big names on sale

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Of the 10 largest U.S. dividend exchange-traded funds, seven are in negative territory year-to-date

. And none of them have posted even half of the return of the S&P 500 index, which is up by 13 per cent this year after factoring in dividends.Last month, Bespoke Investment Group wrote that the 100 stocks in the S&P 500 that pay no dividends were up by an average of 20.7 per cent so far this year.

For example, the benchmark yield on 10-year Government of Canada bonds hit a low of 0.43 per cent in mid-2020. That’s hardly enticing when the S&P/TSX Composite Index pays a dividend yield of around 3 per cent. And now that “higher for longer” has become the financial refrain of the moment, the pressure on dividend stocks has increased.

“Dividend-paying companies are now paying more to remain competitive with higher bond yields,” Mr. Basinger said. The average valuation on those names is also about 15 per cent below historical norms, he added.

 

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