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| By Jim Nelson |
The stock market is starting 2026 on a seemingly odd note.
The big tech stocks that have dominated returns are taking a breather.
Questions about AI spending and new AI tools are adding new wrinkles to the AI story — and investors aren’t too happy with it.
But behind the scenes, it isn’t all bad for markets.
Some sectors such as healthcare, energy and consumer goods are showing signs of life.
That’s good news for the market.
Things just appear worse because a small handful of big-tech stocks now weigh heavily on the stock market’s headline numbers.
If this shift continues, the big winners this year will be smaller, non-tech companies.
How can investors find good opportunities here?
One common denominator that great companies outside of tech have is that they tend to pay out generous dividends to their shareholders.
Yes, after the tech-driven rally the past few years, dividends may sound quaint.
But a focus on great income-producing stocks could be exactly what your portfolio needs right now.
The Power of Dividends Over Time
Dividends matter.
According to Professor Jeremy Siegel, who wrote the gold-standard book on dividend investing, “Stocks for the Long Run,” regular cash infusion can mean big returns for your portfolio.
When dividends are reinvested in stocks, over a multi-decade investment lifetime, it can boost the total value of an investment portfolio by 50%.
That turns a $1 million portfolio into $1.5 million.
And, in retirement, dividends can shift from being reinvested to providing cash flow.
Given the maximum payouts in programs such as Social Security, and the decline of pension programs, a portfolio of dividend stocks is essential as another income stream.
A Solid Way to Thrive in Challenging Markets
While dividend-paying stocks may not sound as exciting as the latest tech stock, that’s actually a feature, not a flaw.
We can measure volatility using beta. Beta is a measurement of a security’s volatility compared to the market as a whole.
- A beta above 1 means that a stock is more volatile than the market it’s being compared to.
- A beta below 1 means the stock is less volatile than the market.
According to data from Hartford Funds, between 1973 and 2021, dividend payers had a beta of 0.94.
Non-dividend payers, often growth stocks, had a beta of 1.18.
That means dividend stocks are almost 20% less volatile than your average stock that doesn’t pay dividends.
For a rising market, higher volatility can mean higher returns. But in a declining or sideways market, that volatility can mean more downside than average.
But since dividend stocks don’t subject you to as many wild up-and-down swings, you’ve got portfolio stability … and it helps you stay afloat during downturns.
How to Find Opportunities Amid Today’s Low Yields
With the surge in tech stocks the past few years, dividends have fallen out of favor, despite being a huge component of lifetime portfolio returns.
The S&P 500 index has a yield of about 1.14% today. That’s hardly better than cash in the bank!
Fortunately, that’s just the stock market’s average dividend yield.
It’s still possible today to find dividend yields of 3% or more in common stocks.
That’s double the market’s average payout and includes some great industry-leading companies like AT&T (T), Altria (MO) and Duke Energy (DUK).
Investors can also invest in high-yielding stocks. But that’s a trade-off.
The higher the yield, the lower the expected capital gains. For those in or near retirement, however, owning a few high-yielding stocks can help substantially boost your income.
There are also several types of companies such as real estate investment trusts (REITs) or business development companies (BDCs) that have high yields.
But their structure also comes with extra tax obligations — so be sure you understand the implications.
Bottom line: There’s a rich world of dividend-paying stocks out there.
Finding the best of the best, however, would normally take effort.
That’s why in just seven hours — at 2 p.m. Eastern today — Dr. Martin Weiss will unveil how we’ve done that work for you.
The event — which, as a Weiss Ratings Member, you have access to — is titled “The Infinite Income Summit.”
I hope to see you there.
Sincerely,
Jim Nelson
