The dividend yield on the S&P 500 is the lowest since the dotcom bubble

The S&P 500’s dividend yield has fallen to about 1.15%, near a 50‑year low (the only trough lower was 1.09 in the tech bubble), a decline driven by the rise of mega‑cap, low‑or‑no‑dividend tech names—information technology now comprises ~35% of the index and firms like Nvidia (0.02%), Microsoft (0.76%) and Alphabet (0.29%) are compressing income even though roughly 56% of companies still pay dividends; the shift has produced one of the weakest stretches for dividend payers in 25 years and left traditional defensive sectors soft. Trivariate Research’s Adam Parker argues investors should favor dividend growers with low payout ratios (bottom quintile, <16.2%), which have historically outperformed over two years, and he highlights select long ideas that recently raised payouts and retain room to increase them again—Cinemark (12.5% raise, 1.24% yield, $300m buyback), Capital One (>$0.60→$0.80 raise, 1.58% yield, Q3 EPS beat) and Cheniere Energy (10% raise, 1.07% yield)—as potential plays for income-focused portfolios amid the tech‑driven yield squeeze.

Analysis

The S&P 500's cash yield has compressed to roughly 1.15%, near a 50‑year low and slightly above the 1.09% trough during the tech bubble, driven primarily by the outsized weight of information-technology names that now constitute about 35% of the index. Large-cap tech payers have negligible yields (Nvidia 0.02%, Microsoft 0.76%, Alphabet 0.29%), while the share of companies that pay dividends remains around 56%, implying the index-level yield decline is capitalization-weight driven rather than a drop in the incidence of dividends.

Trivariate Research identifies this as creating one of the weakest stretches for dividend payers in 25 years and notes traditional defensive sectors (consumer staples, telecom, pharma) have also been soft; simultaneous valuation concerns and uncertainty about the Federal Reserve have recently pressured tech, producing episodic volatility (Nvidia: +33% YTD but ≈‑12% MTD and a weak session after strong earnings). Parker highlights that companies which increase dividends, particularly those in the lowest payout-ratio quintile (<16.2%), have historically outperformed their industry peers over the subsequent two years.

He presents specific long ideas with supporting data: Cinemark raised its quarterly dividend 12.5%, yields 1.24%, reported a Q3 revenue beat, retired pandemic debt and authorized $300m buybacks; Capital One raised its quarterly payout from $0.60 to $0.80, yields 1.58%, and reported Q3 EPS $4.83 (vs $4.38 est.); Cheniere increased its dividend 10% to $0.55 (1.07% yield) and carries buy-side analyst upside in the mid-20s to 30s percent range.

Key Decisions for Investors

• If your mandate prioritizes income, reduce passive S&P 500 yield exposure and reallocate a portion to dividend growers with low payout ratios (bottom quintile, <16.2%), as they have tended to outperform over two years
• Consider selective buys in the note's names—CNK, COF, LNG—after verifying current payout ratios and recent fundamentals: Cinemark's dividend raise plus $300m buyback and debt retirement; Capital One's EPS beat and payout increase; Cheniere's 10% raise and analyst upside
• Limit concentration and monitor macro risks by tracking Fed commentary and tech valuation signals (NVDA’s sharp YTD/MSD moves illustrate volatility risk); use position sizing or hedges if adding duration into a tech-heavy market
• Require clear dividend sustainability metrics (payout ratio, free cash flow and balance-sheet improvement) before increasing allocations to dividend-raising but low-yield names