As we close the books on 2024 and watch the market take shape in the new year, US dividend-oriented investors may have reason to cheer a fresh start.
Indeed, dividend-oriented investors may not be feeling incredibly positive coming out of 2024, a year where the Morningstar US High Dividend Yield Index, which represents the higher-yielding half of the US dividend-paying universe by market cap, lagged the broad equity market as reflected by the Morningstar US Market Index by more than seven percentage points.
Yet there may be reasons for optimism for dividend-oriented investors as we encounter a new market landscape in 2025.
Dan Lefkovitz - Morningstar Index Strategist
“The high-yielding section of the US equity market posted strong absolute returns in 2024, though, overall it failed to keep up. Several dividend-rich economic sectors, including financial services and utilities, performed well, though not well enough to offset a huge year for dividend-light technology stocks, such as Nvidia. Going forward, changing market dynamics could benefit dividend investors. A broadening of gains could benefit dividend payers. The technology sector is currently seen as overvalued by Morningstar Equity Research, while healthcare and energy—both dividend-rich—are considered undervalued.”
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