Why fight the Fed? If lower interest rates are coming, investors are figuring out high dividends are the way to go.
Nine stocks in the iShares Select Dividend ETF, including Lockheed Martin, Edison International and Philip Morris International, are up 8% or more since the S&P 500 topped on July 16, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. That's on top of a dividend yield of 2.3% or higher for all these stocks.
That sure beats the S&P 500's nearly 6% drop in that time. The S&P 500 is struggling since mid-July as many of the AI-infused stocks that drove it higher are rolling over now. And the S&P 500 only yields 1.2%.
"Since the S&P 500 peaked on July 16th, higher dividend paying stocks have been outperforming stocks that pay no dividends," says Bespoke Investment Group.
Going For Yield
Investors' interest in dividend stocks is renewed this summer. If the Federal Reserve is going to cut interest rates, that makes dividends all the more valuable.
The iShares Select Dividend ETF is off less than 1% from mid-July. And it yields 3.53% on top of that. Interestingly, the dividend ETF is up 7.5% this year, not too far behind the S&P 500's 12.2% year-to-date gain.
"If you're of the belief that interest rates will continue to fall on economic growth concerns, dividend stocks should do well in that environment," Bespoke said.
The Kinds Of Dividends Investors Want
Defense contractor Lockheed Martin is the top-performing stock in the iShares dividend ETF since mid-July. It's up 18.9% in that time.
Additionally, the stock yields 2.3%. As a result, you get a dividend stock with solid underpinning. It carries an RS Rating of 90 and Composite Rating of 93. The company's profit is seen jumping 7% in 2025 after falling 5% in 2024.
Utility Edison is another example of a dividend stock with mojo. The stock, which yields 3.8%, is up nearly 12% from July 16. Many utilities are benefiting from the growth of power-hungry AI models. Edison has an RS Rating of 89 and a sky-high Composite Rating of 94.
Tobacco, The Old Dividend Faithful
If you're looking for a stable dividend, it's hard to top Philip Morris. The cigarette maker is cashing in on the growth of smokeless tobacco. Shares of the company are up 9.4% since mid-July and 23% this year. The stock also yields 4.5%.
The trend is definitely favoring dividend stocks. "Only two of the 20 stocks (with the largest weights in the iShares dividend ETF) are below their 50-day moving averages as the new trading week begins," Bespoke found.
Those are odds investors can get behind.
Top Dividend Stocks
Shares of iShares Select Dividend ETF up the most since July 16
| Company | Ticker | Sector | Ch. From 7/16 | Yield |
|---|---|---|---|---|
| Lockheed Martin | LMT | Industrials | 18.9% | 2.28% |
| Edison International | EIX | Utilities | 11.5% | 3.80 |
| WEC Energy Group | WEC | Utilities | 10.4% | 3.79 |
| Philip Morris International | PM | Consumer Staples | 9.4% | 4.48 |
| General Mills | GIS | Consumer Staples | 8.6% | 3.47 |
| PPL | PPL | Utilities | 9.0% | 3.37 |
| Eversource Energy | ES | Utilities | 8.6% | 4.40 |
| FirstEnergy | FE | Utilities | 8.3% | 4.05 |
| Entergy | ETR | Utilities | 8.3% | 3.84 |
