Podcast Summary: The Long View – The Morning Filter: Why 2026 Could Be a Breakout Year for Dividend Stocks

Date: December 1, 2025
Hosts: Susan Jabinski, Dan Lefkovitz (with introductions by Christine Benz)
Topic: The opportunities, risks, and evolving landscape of dividend stock investing as 2026 approaches, with a special focus on performance, buybacks, dividend stability, and sector trends.

Episode Overview

This episode features Susan Jabinski from Morningstar interviewing Dan Lefkovitz, Morningstar Indexes strategist and columnist, for a deep dive into dividend stocks. The conversation covers recent and historical performance of dividend stocks in the US and internationally, how buybacks are impacting dividend yields, pointers for assessing dividend stability, the rise of dividend growth investing, and strategic takeaways for dividend investors heading into 2026.

Key Discussion Points and Insights

1. Why Dividend Investing Remains Relevant

• Dan Lefkovitz highlights the sheer scale of interest in dividend investing:

  "By my count, there's over $1 trillion in funds and ETFs that screen for dividends or dividend-weighted on a global basis." (02:35)

• Dividend investing is seen as a route to participate in equity markets for both income and total returns.

2. 2025 Performance Snapshot: Dividend Stocks vs. the Market

• Dividend indexes have done "well in absolute terms," but trailed the overall US equity market by a few percentage points.

  "When you invest for dividends, you tend to have less exposure to technology stocks...Neglecting Nvidia would be a massive detractor to any portfolio on a relative basis." (03:22, 03:41)

• AI technology has driven market cap concentration, making non-tech dividend portfolios lag.

3. Sector-Level Insights: Winners and Losers

Winners:

• Utilities:

  "They've turned into a growth sector. And again, I blame AI. The power demand for AI processing…has seen power demand increase and utility stocks have done really, really well." (04:37)

• Financials: Big banks and insurers performed strongly, helped by higher interest rates and deregulation.

Laggards:

• REITs & Real Estate:

  "Higher interest rates have kind of weighed on the overall property market...Commercial is being weighed on by E-Commerce." (05:32)

• Energy:

  "The oil price has been weak this year due to oversupply and some weakness on the demand side as well." (06:27)

4. International Dividend Stocks: A Bright Spot

• International dividend stocks "have outperformed US stocks" and "broad international markets," especially in Europe and emerging markets.

  "Banks especially in Europe, which are rich in dividends, have really performed well this year." (06:57)

• Currency movement, particularly appreciation of the dollar, amplified returns for US unhedged investors.

  "Depreciation appreciation of the US dollar has really been a factor..." (07:13)

5. The US Stock Buyback Boom: Implications for Dividend Investors

• 2025 marks the fifth consecutive year where US companies spent more on buybacks (~$1 trillion) than on dividends (~$750 billion).

  "Buybacks are like dating. Dividends are like marriage." (09:10)

• Buybacks are more flexible and have tax advantages, particularly appealing in US tech culture.

  "In Silicon Valley...dividends are kind of considered old economy." (10:00)

• Result: Lower average dividend yields for US stocks (now down to about 1.1%).

  “It's harder to get equity income from US Stocks than it once was.” (10:38)

6. Global Buyback Differences & Tax Considerations

• Buybacks are less prevalent overseas, partly due to cultural and tax differences.

  "Dividends in many markets can be paid out more opportunistically. The tax advantage...isn't as big, especially in Europe." (11:17)

• Yields:

  “Our index of international stocks...the dividend yield exceeds 3%...in the US, it’s 1.1%.” (12:02)

• Caution: International dividends may be subject to double taxation depending on jurisdiction.

7. How to Spot an Unsafe Dividend

Is Dividend History Enough?

• Don’t overemphasize a company’s history of dividend payouts:

  “Just because a company has a 5, 10, 15, 50 year record...doesn’t mean it’s going to continue.” (13:11)

  • Recent high-profile cuts: Dow Chemical, Walgreens, 3M, Intel, Shell (2020).

Forward-Looking Metrics

• Payout Ratio:

  “If you’re paying over 75% of earnings in dividends, we consider that risky and unsustainable.” (15:31)

• Economic Moat: Companies with a “moat” (durable competitive advantage) are more likely to sustain dividends.

  “Companies with economic moats tend to sustain their dividend payments better than companies without moats.” (17:01)

• Distance to Default: A quantitative measure of financial health considering balance sheet and equity volatility.

  “It incorporates balance sheet information, but also...equity price volatility, which...can sometimes suss out financial distress before it shows up in financial statements.” (17:44)

8. Practical Tools: Screens and Indexes for Dividend Stability

• Morningstar indexes like Dividend Yield Focus screen for both moats and distance to default.
  • Sample names: Merck, Pepsi, Kenvu, Alliant Energy. (19:10)

9. Dividend Growth Investing: Evolution & Positioning

• Definition: Focuses on firms raising payouts, signifying financial health and quality.
• Recent trends: Increasing presence of technology stocks (Apple, Microsoft, Broadcom, Oracle) in dividend growth indexes.

  “It’s not necessarily the case that you get no technology exposure.” (21:40)

• Performance: Dividend growth stocks have lagged the broader US market due to tech dominance, but outperform during downturns.

  “During sell offs...dividend growth has held up better entering those sell offs.” (21:16)

• Expectations: Dividend growth tends to perform “in between” the market and high yield segments.

10. Looking to 2026: Strategic Takeaways

“The US equity market is looking a bit frothy...technology sector, AI related stocks, many of those valuations look pretty rich. Valuations are a lot more reasonable on the value side...where a lot of dividend paying stocks tend to be.” (23:54)

• Potential for market rotation and outperformance of dividend stocks, especially if volatility returns.
• Long-term view: Dividend investing remains a viable, defensive approach for both income and total return, even with yield challenges.

Notable Quotes & Timestamps

• Dan Lefkovitz: “Buybacks are like dating. Dividends are like marriage.” (09:10)
• Dan Lefkovitz: “Just because a company has a...50 year record of paying out a dividend doesn’t mean it's going to continue.” (13:11)
• Dan Lefkovitz: “It's harder to get equity income from US Stocks than it once was.” (10:38)
• Dan Lefkovitz: “Companies with economic moats tend to sustain their dividend payments better than companies without moats.” (17:01)
• Dan Lefkovitz: “I wouldn't be surprised to see dividend payers perform well [in 2026]...that’s what we saw in 2022.” (23:54)

Useful Timestamps

• Importance of Dividends: 02:35
• 2025 Dividend Performance: 03:22
• Sector Highlights: 04:31–06:31
• International Dividend Performance: 06:57
• Buybacks and Yields: 08:32–10:38
• Global Differences and Tax: 11:17–12:28
• Dividend Stability Metrics: 13:11–17:44
• Practical Tools for Investors: 18:24–19:23
• Dividend Growth Investing: 20:01–22:50
• Outlook for 2026: 23:54

Conclusion

As 2026 approaches, dividend stock investing remains a core (if evolving) part of the equity landscape. Despite lower yields and a domestic bias toward buybacks, both the US and international markets present opportunities—though the path to stable, growing dividends requires scrutiny beyond simple payout histories. Forward-looking investors should pay attention to payout ratios, economic moats, and financial health to spot reliable dividend payers. While AI-driven tech stocks may continue to steal headlines, 2026 could prove to be a breakout moment for value-oriented dividend stocks, especially if market volatility returns.

Listen to the full episode for a nuanced discussion of these themes and more.