This week’s chart highlights the growing gap between stock and bond income. The current S&P 500 dividend yield is approximately 1.0%, near historic lows, while intermediate-term U.S. Treasury bonds yield nearly 4.0%. One of the primary drivers of this divergence has been the increasing dominance of technology and other growth-oriented companies within the U.S. equity market, many of which pay little or no dividend. Additionally, companies have increasingly favored share repurchases over cash dividends as a means of returning capital to shareholders, further reducing the market’s aggregate dividend yield.
As a result, investors today receive a larger share of their equity returns through capital appreciation and stock buybacks rather than dividend income. Meanwhile, higher interest rates have restored bonds as a compelling source of portfolio income, with Treasury yields now significantly exceeding the income available from large-cap U.S. stocks. In today’s market, investors seeking income may find bonds playing a more prominent role in portfolios than they have in many years.