Dividends Premium: March 2025

The great rotation to dividends and value is picking up steam.

Welcome to your March edition of Dividends Premium.

My first order of business this month is to invite everyone to join me at my Dividends Roundtable, which I host on the Discord application.

The past month hasn’t been so kind to passive investors locked into Big Tech heavy S&P 500 ETFs and the like. There will continue to be trading days when the former leaders bounce. But they’ll resume their slide when investors re-focus on economic uncertainty, inflation and tariffs.

Don’t let Big Tech’s plight distract you. There’s a sector rotation in progress. In fact, the stocks in this portfolio are off to their best start ever so far in 2025.

As in the early ‘00s—a quarter century ago—Big Tech companies are on the verge of changing the world. That time around it was information technology. This time it’s artificial intelligence that’s only started to get traction. But just as in the ‘00s, Big Tech stocks have risen too far, too fast. Now the momentum is shifting and it’s time for fresh leadership.

That’s not the story grabbing headlines now in the popular financial press. But it is the big story in the stock market now.

The kind of high quality, low valuation, high yield, free cash flow-generating stocks I favor in this portfolio are set to be major beneficiaries. That includes this month’s focus stocks highlighted in this report. Happy spring everyone!--RC

Top Quality Dividend Stocks Getting Their Due

Bump to slump: The S&P 500’s gains following November 2024 elections have been erased and then some. And the index is now underwater roughly -5 percent year to date.

Technically, the big cap stock average still hasn’t officially crossed into “correction territory.” That’s popularly defined as a drop of 10 percent or more from the most recent 52-week high, which is currently the February 19 close of 6144.

But in sharp contrast to just a few weeks ago, a growing number of major decision makers seem to be positioning for bigger declines this year. And unfortunately, there’s good reason to believe the bears will be right this time.

The good news: 2025 so far has been a great year for stocks of high quality, big dividend free cash flow generating companies.

The average year-to-date total return for the 18 stocks in our model income portfolio is 9.5 percent. Almost half of them are up double-digits so far, even not counting their generous dividends. And none are so far underwater they can’t and won’t eventually score fat gains this year.

That compares to the slightly underwater performance by the iShares Select Dividend ETF (DVY), which is a commonly used benchmark for dividend-oriented stock market strategies.

Since inception, the portfolio is up 45.39 percent. And its weighted average yield is 5.2 percent, with the majority of holdings headed for dividend increases this year. That compares to an extremely erratic 4 percent yield for the DVY, and just 1.4 percent for the SPDR S&P 500 ETF (SPY).

Our portfolio’s yield is highly competitive with what most bond funds pay as well. And it’s now running a percentage point above the typical money market fund, despite the fact I’m holding nearly 18 percent in the Vanguard Federal Money Market Fund (VMFXX).

Trouble Ahead for Big Tech..and The S&P 500

The rise of dividend paying stocks isn’t helping all of those passively invested dollars in the stock market, which outnumber actively managed funds. That’s because they’re heavily invested in the S&P 500 and related indexes.