Motley Fool Money: A Rough Day for Dividend Knights – July 29, 2025
Hosted by Emily Flippen alongside analysts Matt Argusinger and Ant Schiavone, this episode of Motley Fool Money delves into the current landscape of dividend-paying stocks, exploring recent earnings reports, shifts in investment preferences, and the evolving list of Dividend Knights.
1. Introduction to Dividend Knights
The episode begins with Emily Flippen introducing the concept of Dividend Knights, a proprietary framework developed by analysts Ant Schiavone and Matt Argusinger. This framework aims to identify high-quality dividend-paying companies that not only provide consistent income but also generate substantial long-term returns.
Ant Schiavone explains the rationale behind Dividend Knights:
“We came up with the Dividend Knights... It follows a rule of 10, Emily, which is we looked at companies that have paid a dividend for 10 consecutive years, have grown that dividend at a 10% compound annual rate for those 10 years, and have outperformed the S&P 500 on a total return basis.”
[00:49]
Matt Argusinger adds depth to the framework by emphasizing the importance of total returns:
“When you look at total returns for stock as well, you have the income generating aspects, but also an element of capital gains here and growth that make it maybe a little bit more of a solid play than purely looking at the dividend.”
[02:06]
2. Shifting Preferences: Dividends vs. Share Buybacks
Emily and the analysts discuss a noticeable trend where companies and investors are increasingly favoring share buybacks over traditional dividends. This shift has led to a significant decrease in the S&P 500’s dividend payout ratio.
Emily Flippen observes:
“We've seen the S&P 500's dividend payout ratio come down dramatically as buybacks have become the preferred method to return cash to shareholders.”
[02:38]
She further contextualizes investor sentiment:
“Nobody cares about dividends when The S&P 500 is appreciating 25% a year. Today the S&P 500 yields about 1.2%... but when the market does hit a rough patch, income producing assets become more attracted to investors.”
[02:38]
Matt Argusinger echoes this sentiment, noting that during market downturns, investors pivot back to earnings and cash flow.
3. Earnings Reports: UnitedHealthcare and Novo Nordisk
Amidst earnings season, UnitedHealthcare (UNH) and Novo Nordisk reported challenging results, leading to their dividend yields surpassing 3%.
Emily Flippen characterizes the situation as a "falling knife":
“Is this a buying opportunity or is this a falling knife... these are probably two stocks that for me, I would put into the proverbial too hard pile.”
[05:05]
Ant Schiavone highlights the decline in qualified Dividend Knights within the healthcare sector:
“When we first did the Dividend Knights Back in 2022, there were 11 healthcare companies that qualified. Today, as of June of this year, there are just two.”
[07:25]
The analysts debate whether these companies are experiencing secular downturns or cyclical challenges, emphasizing the complexity of the healthcare sector.
4. Whirlpool’s Dividend Cut: A Rare Development
The conversation shifts to Whirlpool, a stalwart in the domestic appliance market, which recently faced a 15% stock drop and announced a significant dividend cut.
Ant Schiavone expresses disappointment:
“This was the big surprise... a company that has paid a dividend for over 70 years and not cut it once... yet yesterday announced that it was cutting its dividend by almost half.”
[09:11]
She attributes the cut to increased competition, inventory stockpiling by rivals, and a leveraged balance sheet:
“Management's going to cut that dividend, try to shore up the balance sheet and hope that the tariffs come through to help the business and that the housing market revitalizes...”
[09:11]
5. Declining Number of Dividend Knights: Where Are the Opportunities?
The Dividend Knights list has shrunk from approximately 175 companies in 2022 to 117 in 2025, signaling a tougher environment for dividend investors.
Ant Schiavone identifies sectors still offering potential:
“One sector that I look to that I think is interesting to me... real estate. Prologis, one of the world's largest REITs... is back on the Dividend Knights list.”
[11:00]
Emily Flippen highlights the energy sector as another area of interest:
“The energy sector stands out to me... management teams have become way more disciplined by only investing in the highest returning projects.”
[11:41]
Both analysts agree that Real Estate and Energy present promising opportunities within the remaining Dividend Knights.
6. Lightning Round: Key Considerations for Dividend Investors
The episode concludes with a lightning round, where the hosts and analysts address pressing topics for dividend investors.
a. Payout Ratio vs. Safety
Ant Schiavone sets a guideline:
“At 70% or lower payout ratio... Above that, I start to get a little worried.”
[13:46]
Emily Flippen emphasizes the importance of returning cash to shareholders:
“I'm usually looking for companies that pay out at least 50% of their earnings free cash flow as a dividend.”
[14:19]
b. ETFs vs. Individual Stock Picking
Emily Flippen recommends specific ETFs for diversified exposure:
“The Schwab US Dividend Equity ETF ticker symbol SCHD... is a good way to get cheap diversified exposure to high quality dividend payers.”
[15:10]
Ant Schiavone adds:
“I own several dividend ETFs... the Vanguard Dividend Appreciation ETF (VIG) and the Noble ETF (NOBL) are also solid choices.”
[15:46]
c. Growth vs. Yield
Ant Schiavone discusses the balance based on investor preference:
“If you're someone who wants to generate yield... go for high yield companies. If you have a longer time horizon... go for dividend growth.”
[16:59]
Emily Flippen proposes a combined approach:
“Look for companies where the dividend yield plus the expected dividend growth rate equals at least 10%.”
[17:37]
7. Conclusion and Outlook
Emily Flippen wraps up the episode by acknowledging the challenges faced by Dividend Knights but remains optimistic about sectors like Real Estate and Energy. The discussion underscores the importance of strategic selection and adaptability in dividend investing, especially in a dynamic market environment.
Matt Argusinger leaves listeners with a hopeful note:
“Here's to hoping that tomorrow holds better things for some of our dividend paying investments.”
[18:01]
Key Takeaways:
- Dividend Knights Framework: Focuses on companies with 10 years of dividends, 10% CAGR in dividends, and outperformance of the S&P 500.
- Shift to Buybacks: Increasing preference for share buybacks over dividends, reducing overall dividend payouts in major indices.
- Earnings Challenges: UnitedHealthcare and Novo Nordisk face headwinds, raising questions about their dividend sustainability.
- Whirlpool’s Surprise: A rare dividend cut from a long-standing dividend payer highlights the volatility in certain sectors.
- Opportunities in Real Estate and Energy: Despite a declining number of Dividend Knights, sectors like Real Estate (Prologis) and Energy show promising potential.
- Investor Strategies: Emphasizes the importance of payout ratios, considering ETFs for diversification, and balancing growth with yield based on individual preferences.
This episode provides dividend investors with a comprehensive analysis of current market conditions, highlighting both challenges and opportunities within the dividend landscape.