Summary

• Dividend investing has lagged growth stocks recently.
• When combined with sustained headwinds for the sector, it can be tempting to give up on dividend investing and chase the hot stocks instead.
• I share why this is a mistake.
• I also share some of the best dividend investments to buy right now.
• Looking for a portfolio of ideas like this one? Members of High Yield Investor get exclusive access to our subscriber-only portfolios. 

Staying the course as a dividend investor can be very challenging at times, and thus far, 2025 has illustrated this as well as any year in recent memory. Over the past several years, dividend growth investors, especially those in funds like the Schwab U.S. Dividend Equity ETF (SCHD), have gotten left behind the S&P 500 (SPY) with some very lackluster performance, as the market’s sentiment has been overwhelmingly favorably directed towards mega-cap tech stocks, rapidly growing AI companies like Palantir (PLTR), and of course, Bitcoin (BTC-USD).

Further compounding the headwinds for dividend stocks have been the higher interest rates plaguing the sector, and in particular REITs (VNQ) and other high-yielding sub-sectors of the dividend space.

As such, it can be easy for investors to throw in the towel and instead chase whatever stocks are hot right now. Moreover, earlier this year, the market crashed in a panic over the rollout of the Trump administration’s tariffs on virtually all the U.S.’s trading partners across the world. Many observers forecast a severe recession, and as a result, stocks sold off very aggressively.

As a dividend investor, it would have been easy to panic there, sell your stocks, and try to guard against further losses, because it seemed like the market was headed lower day after day. However, many who did that ended up getting left behind as the market quickly rebounded in the days and weeks that followed. Therefore, if you remained calm and bought the dip, you would be better off today than you were before the crash even occurred. With this in view, in today’s article, I am going to share why I think investors should continue to keep calm and stay the course with dividend investing, even though they have suffered from significant underperformance in recent years. In addition, I am going to share some of the best dividend stocks to buy today for long-term income and total returns on a risk-adjusted basis, even as investors wait to see if the Fed will finally give dividend investors much-needed interest rate relief.

Why Dividend Investors Should Stay The Course

Let us address each of these issues in turn and explain why investors who stay the course are highly likely to end up ahead over the long term. First of all, the concerns about the AI boom are likely short-lived because eventually the benefits of AI are going to begin to flow through to dividend stocks. In many cases, they already are, as we see dividend growth machines like Brookfield Renewable Partners (BEP) (BEPC), Brookfield Infrastructure Partners (BIP) (BIPC), Enbridge (ENB), and many others announcing major growth opportunities coming from the data center build-out and the need for increased energy production and infrastructure to support the AI boom. This will likely only become more evident in the coming quarters and years, which should drive strong growth in these and similar dividend stocks.

Additionally, even industrials and consumer stocks like FedEx (FDX), PepsiCo (PEP), McDonald’s (MCD), Walmart (WMT), and many others will likely be huge beneficiaries of the AI boom, as advanced models get employed and their large treasure troves of proprietary data as well as economies of scale can be deployed to leverage their competitive strengths over peers. Additionally, dividend-paying biotech and pharma giants like Pfizer (PFE) will likely benefit as well, as their R&D will likely become much more efficient once advanced AI models become much more prominent in the drug development process.

Meanwhile, the concerns about the interest rate headwinds are legitimate, and certainly, there is a viable scenario in which they last for an extended period to come, especially on the long end of the curve. However, ultimately, it should not matter too much to dividend investors deploying capital today. This is because the higher interest rates are largely already priced in and, in some cases, I think, are priced in too much. Therefore, you are able to buy dividend stocks at higher yields and lower valuations than you would be able to otherwise. Moreover, as long as you are insisting on quality companies with strong balance sheets, which you should be doing anyway as a dividend investor, higher for longer interest rates should not be that big of a deal. If anything, they should be cheered because they allow you to grow your passive income stream faster than you would otherwise have been. Meanwhile, if interest rates do move down in the coming years, it could provide a very powerful catalyst for share price appreciation and therefore, elevated total returns on capital deployed today.

Finally, concerns about an economic downturn, whether they are caused by tariffs and trade uncertainty or otherwise, should not be overly feared by dividend investors either. This is especially true if you employ sound principles of dividend investing, which include adequate diversification across sectors and insisting on putting the bulk of your capital to work in durable, defensive business models with strong balance sheets and well-covered growing dividends. Therefore, in the event of an economic downturn, your dividend income stream should remain quite stable and likely even continue to grow, while in turn giving you more attractive prices to be able to redeploy the capital into more attractive opportunities. Additionally, an economic downturn would likely solve the interest rate problem by forcing the Fed to cut rates and bring down interest rates overall, thereby helping to offset economic headwinds on stock prices. And even if the stock prices do not immediately rebound from a fall in interest rates due to economic concerns overshadowing them, it should lower the cost of capital for the businesses that you hold in your portfolio, thereby enabling them to accelerate growth investments, which should bear fruit over time, and eventually the stock prices will catch up with that fact.

Dividends To Buy

With all of that said, what are some of the best dividend stocks to buy today? A great place to start is with Realty Income (O), as it is widely considered the gold standard of real estate investment trusts with a long history of over a quarter century of growing its dividend every year at a mid-single-digit CAGR, thereby making it an investment that should outpace inflation over the long term. In addition, it offers a current dividend yield of nearly 6%, which is well covered by cash flows, and those cash flows are extremely durable given that they come from a portfolio of thousands of triple-net lease properties that are leased to high-quality tenants, many of which are investment grade and are also largely resistant to recessions and e-commerce headwinds.

With an A- credit rating underpinning the business, O stands out as a company that should withstand technological disruption, economic turmoil, and higher for longer interest rates. Moreover, as a bond proxy, it should enjoy significant upside if interest rates do falter. In the meantime, investors can collect a juicy dividend yield and continue to reinvest it in buying shares at an attractive price while waiting for the interest rate environment to change.

Another great opportunity to buy right now is Oneok (OKE), as it is a well-diversified energy infrastructure company that stands to benefit from numerous potential catalysts, including growing energy demand for the AI boom as well as energy export tailwinds. Meanwhile, it issues a 1099 tax form that makes it a C-corporation, and yet it trades at a compelling discount to many of its C-corp peers like Kinder Morgan (KMI) and the Williams Companies (WMB) on an EV/EBITDA basis, while offering a dividend yield of over 5%, attractive growth potential, and trading at a much lower enterprise value to EBITDA multiple.

A third attractive dividend investment is to simply buy the Schwab U.S. Dividend Equity ETF ((SCHD), as it has one of the lowest expense ratios of all dividend growth ETFs at 0.06%, is diversified across over 100 blue-chip dividend growth stocks, offers a dividend yield of nearly 4% on a forward-looking basis, and has a dividend track record of growing its payout at a near 11% CAGR over the past decade.

Last but not least, alternative asset managers like Blackstone (BX), Brookfield Asset Management (BAM) (BN), and Blue Owl Capital (OWL) are all highly compelling dividend investment opportunities right now, as they offer dividend yields in the 3–5% range on a forward-looking basis, double-digit expected annualized growth rates for both their underlying cash flows and dividend payouts, and have strong investment-grade credit ratings. Meanwhile, a sharp decline in interest rates should also be a huge boon to their businesses since they tend to employ significant leverage in their underlying holdings and are also viewed as competing products with traditional investments like bonds.

Investor Takeaway

Staying the course with dividend investing has not been easy recently due to the AI stock market boom largely bypassing the sector, interest rates remaining higher for longer than many were hoping, and concerns about how trade tensions and other macro risks may affect dividend-paying stocks. However, staying the course is important to keep the compounding process going, leading to large increases in passive income from dividends over the long term. A quick look at SCHD’s exemplary long-term dividend growth—despite also paying out a significantly higher dividend yield than SPY does—tells a powerful story of the power of compounding with dividends:

While stock prices rise and fall with the whims of Mr. Market, the hard power of dividends is what matters most to me in the long term. Therefore, I continue to buy blue-chip dividend growth stocks whenever they go on sale. In fact, I view the recent underperformance in the dividend stock sector as a huge gift from Mr. Market because it has given me an opportunity to lock in attractive yields and valuations on these stocks. As a result, I continue to opportunistically yet aggressively deploy capital at High Yield Investor.

SDIP
Super Dividend Re-evaluated
The Oak Bloke
Jul 28

For those who followed my idea “should you be SDIP-id” on 14th April today at £7.14 per share you’re now £1.06 better off (£6.08 → £7.14) and have enjoyed 4 months of dividends worth £0.23.

£1.29 total is a 21.2% return in just over 3 months. I’m very happy with that and my finger hovered over the sell button. I started writing this thinking I was going to call time on it.

But then I look at what’s up and what’s down. After all, SDIP blindly rebalances based on companies based on a set of eligibilities. Just like fellow fun runner Mr Head it arbitrarily gets rids of any company that breaks its rules. To replace it SDIP picks the next best one (judged on highest eligible yield) that it doesn’t already own. It also periodically rebalances so it part sells what’s gone up to reduce the holding back to 1% and buys more of what’s gone down to rebalance those to 1% also, so each quarter everything rebalances to 100 shares of 1% each.

So this ETF potentially waters its weeds and trims its flowers, with the important exception that the weeds have to also flower (deliver dividends) and any that either cut dividends or profit warn that indicates they could prospectively cut then get removed. So SDIP waters its weeds OR remove its weeds – it’s an important distinction. But it does trim its flowers back to 1% of fund regardless of how successful they are.

Eligible companies must have:

No official announcement (e.g. RNS), at the quarterly rebalance dates, that dividend payments will be cancelled or significantly reduced in the future.

Market Cap >$500 million.

Average liquidity >$1 million over the last three months.

Primary listing in a Developed Market or Emerging Market (but excludes India, China, and Argentina). (Includes Hong Kong)

Dividend yield of >6% and <20%, if they are not current constituents, and at least 3% if they are current constituents.

Traded on 90% of the eligible trading days for the previous 6 months.

Free Float percentage of total shares outstanding of at least 10% or a minimum Free Float Market Capitalisation of $1 billion.

No Closed End Fund, Business Development Companies (BDCs), Partnership or Investment Trusts.

There is a quarterly rebalance back to 100 constituents at 1%, with the highest yield (that meet the above criteria)

SDIP delivers around ~0.8% yield per month so about a 10% per annum:

Let’s look at the biggest risers:

5.2X bagger Bright Smart based in Hong Kong is a cash offer buy out by Morgan Stanley. That’s interesting, the South and SE Asian markets are red hot with IPOs in 2025.

2 holding SES, covered previously, is up 60% is a beneficiary of European military spend.

Marfrig is a large Brazilian Beef producer up 49%. Record exports are behind the rise.

BW LPG is a tanker fleet operator up 37% on growing profits.

Kenon is a renewable energy producer based in Texas. That’s interesting too. That is thriving, up 32% YTD, so energy producers are still doing well even if President Trump dislikes them. There’s strong demand for energy.

Now let’s consider the downs.

100 place lender Ready Capital I saw last time and this is down another 15% to a -40% drop, they do say the US housing market is in trouble.

#99 Two Harbors another Real Estate investment trust, cut its dividend too.

#98 Franklin Real Estate Finance – a third one to cut their dividend. So three that will drop away and in the bottom 10 I spot several more US Realty companies.

97 Turk Tractor

The clue is in the name and this manufactures 2/3rd of Turkish tractors and sells to 125 countries also. It also makes Farm Machinery like combine ‘arvesters, and Construction Equipment (diggers, loaders, bulldozers) The Turkish economy has been…. challenging.

Interest rates peaked at 58.8% and are now “only” 42.6%. The Turkish government gives a 50% interest rate subsidy bring the cost of finance to 21.3% but even this is painful. Its profits have dropped 90% and a dividend will be impossible. So it’s SELL SELL and Bye Bye Turk Tractor.

There are more Real Estate losers and bits and bobs, and overall the trust sums to 99.9% so its winners have managed to offset the losers since the last rebalance.

Of the 100 there are 8 UK holdings. Those are up on average 9.6% since the last rebalance, and I’m happy with all of those.

Percentage return of the UK-listed components of SDIP since last rebalance in May 2025
Of the others it’s interesting to see Europe, HK, Israel all are generally strong performers while the US, SE Asia and BRICS nations underperform. Trump Tariff fall out anyone? (100% is the initial 1% holding at the last rebalance, so holdings traded in France are up 26% for example, while Indonesia is down -21%.

With “deals” now completing (the EU completed as I write) then perhaps the tariff issue improves going forwards (or weeds get cut)

Conclusion
I’m not going to sell SDIP. I said I’d revisit and revisit I have. This gives exposure to large cap dividend-paying companies that you wouldn’t otherwise easily access and yet is far more focused than a global index.

There is a 0.45% management charge plus trading costs (quarterly) which I expect aren’t awfully high, but I couldn’t find what they were (the TER isn’t disclosed that I could see).

Story by Edward Sheldon, CFA

Young Asian woman with head in hands at her desk© Provided by The Motley Fool

Global stock markets have had an incredible run since their April lows. Major indexes such as the S&P 500 and the FTSE 100 have flown to new all-time highs while some stocks like Palantir and Joby Aviation have risen more than 100%.

This level of enthusiasm for stocks has surprised a lot of people given that economic uncertainty remains high. And it begs the question – is it now only a matter of time until we see a stock market crash?

The truth about stock market crashes

The truth about stock market crashes
Volatility in the stock market’s very common, but it’s not often that we see a full blown crash. This is generally defined as a drop of 20% in a short period of time. And these only tend to come around every five to 10 years.

According to Capital Group, on average they occur about every six years. It’s usually when something unexpected happens (eg Donald Trump slapping huge tariffs on the whole world).

Given that we had one in April, I’d be very surprised to see another in 2025. Two crashes in one year would be unusual.

Given that we had one in April, I’d be very surprised to see another in 2025. Two crashes in one year would be unusual.

We could see a pullback in 2025

I do think there’s a good chance we’ll see some volatility in the second half of 2025 though. It might be a 5% pullback, or it may be a 10% move lower (defined as a ‘market correction’).

I don’t know when it will occur. It could come soon or it could come later in the year. And I don’t know exactly what will cause it. It could be related to tariffs or it could be related to corporate earnings or something else.

One thing I do know however, conditions are ripe for a pullback. Right now, there’s a lot of froth in the market.

I’ll buy the dip

I’m not afraid of market volatility though. In fact, I’d welcome it. The reason I’d embrace it is that it would give me the opportunity to buy stocks at lower prices. That’s what I want to be doing as a long-term investor.

A decent market pullback could present me with some compelling opportunities. Whether it’s the opportunity to add to an existing holding at a great price, or buy a new stock at a low price, I’d be able to put some of my cash pile to work.

I’ll point out that there are lots of stocks I’d love to buy more of at lower prices. One example is international payments firm Wise (LSE: WISE). I’ve been buying this stock in recent months. And if it was to come down 10%, I’d snap up more to build my position.

You do not need to take big risks to grow your Snowball.

The chart includes earned dividends but re-invested in another high yielding share. It’s high risk to buy the share now but as always it’s about timing and then time in. You would have achieved the holy grail of investing in that you could withdraw your capital, invest it an another high yielding share and receive income at a cost of zero, zilch, nothing.

Highlights

·   Share price total return comfortably outperformed the FTSE Actuaries All-Share Index by over 5% with a total return of 14.2% for H1 2025.

·  Net asset value (NAV) total return, with debt and Independent Professional Services (“IPS”) business at fair value, for H1 2025 delivered a performance of 15.0% (15.0% with debt at par).

·    Another robust performance from IPS, with net revenue increasing by 7.7%, profit before interest and tax up by 7.5% (compared to H1 2024) and valuation up 4.8% to £203.8 million (compared to 31 December 2024).

·     The Company issued 1.3 million new Ordinary Shares at a premium to NAV during H1 with net proceeds of £11.6 million.

  

Strong Longer-Term Record 

·   Consistent share price and NAV (with IPS and debt at FV) outperformance of the benchmark over one, three, five and ten years.

·   Share price total return over 10 years of 187.5% (FTSE All-Share: 92.7%), which compares favourably with UK Equity Income peers.

Dividend Highlights 

·    Declared a first interim dividend of 8.375 pence per ordinary share, paid in July 2025, representing an increase of 4.7% over the prior year’s first interim dividend.

·     It is the Board’s intention for each of the first three interim dividends for 2025 to be equivalent to a quarter of Law Debenture’s total 2024 dividend of 33.5 pence per ordinary share.

·  Continued strong performance of the Portfolio and growth of the IPS business supports the Board’s intention to maintain or increase the total dividend in 2025, enabling the Company to build on its’ 46 years of increasing or maintaining dividends to shareholders.

·      Dividend yield of 3.4% based on our closing share price of  995 pence on 24 July 2025.

·      Total dividend income from the portfolio of £22.5 million (H1 2024: £19.9 million).

Here’s how long it would take to generate a second income of £5k every year !

Christopher Ruane explains the maths behind building a second income from dividend shares, as well as some of the opportunities and pitfalls.

Posted by Christopher Ruane

Published 26 July

PHNX

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Using money to try and make money is basically how I would sum up passive income plans that are based on investing in dividend shares. With a long-term mindset, such an approach can be lucrative. For example, a spare £5,000 today could be invested in such a way that hopefully it ends up generating that much every year as a second income.

That is not based on some pie-in-the-sky “side hustle”, but instead is based on the dividend prospects of large blue-chip firms with proven business models.

Why the long-term approach matters

However, it is crucial to appreciate that this really does depend on taking a long-term approach to investing.

For £5k to generate £5k in dividends next year would require a 100% dividend yield. I see that as totally unrealistic even from very high-risk shares. For context, the current FTSE 100 dividend yield averages 3.3%.

However, by spreading the £5k across a handful of carefully chosen diversified shares, I think an investor could realistically aim for a 7% compound annual growth rate. After 33 years compounding at that rate, the portfolio ought to be worth over £74,000.

Not bad at all for a £5k investment today ! Then, at that point, if the portfolio is invested in 7%-yielding dividend shares, it ought to generate an annual second income of over £5,000 without any of the capital being withdrawn.

A higher or lower compound annual growth rate and yield could mean a shorter or longer timeframe than 33 years. But I think it is important to be realistic about possible returns and risks.

Finding the right shares matters too !

That compound annual growth could come from dividends, share price growth, or both. But dividends are never guaranteed and if share prices fall, that could hurt the portfolio’s growth rate. Clearly, it is important to take care when looking at possible shares to buy for a second income.

One share I think investors should consider at the moment is FTSE 100 insurer Phoenix Group (LSE: PHNX).

The company’s 8.3% dividend yield is certainly impressive – and the company aims to grow the payout per share annually. But as dividends are never guaranteed, it is important for investors to look at the source of a company’s payouts.

Phoenix may not be a household name but it is a big business. In fact, it is huge, with around 12m customers.

Its long-term savings and retirement business helps provide some resilience and predictability of likely future revenues. Brands such as Standard Life help it maintain a competitive position in the marketplace.

Its huge book of assets brings risks. For example, if the property market falls steeply, Phoenix may need to book losses on its mortgage book should the pricing assumptions it is built on no longer apply.

On balance, though, I see Phoenix as a firm with a proven business model that I think could be a low-key but resilient performer over the long term.

A home for the income

To start buying shares, an investor needs somewhere to put their available funds for buying shares and then accumulate any dividends.

So a useful first step would be setting up a share-dealing account, Stocks and Shares ISA, or share-dealing app.

Dividend shares to consider for a 5-star ISA !

Posted by Royston Wild

Published 27 July

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Thanks to the power of compounding, investing in dividend shares can be the fast-track to building significant wealth in a Stocks and Shares ISA.

Compounding involves reinvesting all the dividends one receives to buy more shares. More shares mean more dividends, and over time this snowball effect can supercharge long-term portfolio growth.

Let’s say an investor puts £500 monthly into a Stocks and Shares ISA, reinvesting dividends along the way. Thanks to the compounding effect, they’d have a portfolio worth £560,561 after 25 years, comprising deposits of £150,000 and three times as much as this — £410,561 — in investment returns. That’s based on an average annual return of 9%.

There are thousands of dividend-paying shares, funds, and trusts to choose from in the UK alone.

If you are nervous about the stock market, one way of starting on your journey is to buy a tracker that tracks the major indices. If you can choose when to sell you will not lose any money, as major markets in the long run go up, partly to inflation. There will be plenty of thick and thin, so when the markets are falling it may be best to have a modest yield to add to your Snowball.

With markets near to all time highs it’s a very dangerous time to buy a tracker.

Here, you would have doubled your money and the variable dividend re-invested into a higher yielder would have added to your Snowball. What appeared at the time to be a high risk purchase, in fact turned out to be a low risk purchase.

APAX leaves the Watch List after it received a bid this week.