Even as the stock market has roared back in 2023, many dividend stocks have floundered.
Their struggles reflect the year’s narrow rally, which has been focused on names in artificial intelligence. Sectors with many of the highest-quality durable dividends—healthcare, energy, and financial services—have suffered in comparison.
“The big winners this year haven’t been the dividend champions,” says Dan Lefkovitz, a strategist for Morningstar Indexes.
The Morningstar Dividend Composite Index—a broad measure of dividend stock performance—has risen 7.7% through July. That’s less than half of the wider market’s 20.6% gain as measured by the Morningstar US Market Index.
Meanwhile, the Morningstar High Dividend Yield Index, which focuses on the higher-yielding half of the US dividend-paying market, is up just 3.9% for the period. In addition, the Morningstar Dividend Leaders Index—a collection of the 100 highest-yielding stocks with a consistent history of paying their dividends and a demonstrated ability to sustain their dividends going forward—has mostly flatlined, up only 0.9% for the same period.