Barron's Streetwise - BofA’s Favorite Non-AI Stocks. Plus, Nvidia’s Penny Dividend

Episode Date: November 21, 2025

A Wall Street researcher has 16 picks, and Jack pronounces 15 of them correctly. Also, what dinky dividends say about the market. Learn more about your ad choices. Visit megaphone.fm/adchoices

I'm going to have to get energy somehow. Do you have like a hype song? Alexa, play Fortunate Sun by Creedon's Clearwater Revival. Oh, nope. Let me find some license music that we can actually use. There we go. You're listening to the Barron Streetwise podcast. I'm Jack Howe with me, our audio producer, Alexis Moore.

Hi, Jack. My email box is filling up with all the 2006 look-ahead reports, the predictions for what's going to come. to pass in the stock market. Everyone sounds so confident. Here's some, this is someone I don't know. It just says in the subject line, 2006 will break the four-year crypto cycle. I think crypto has already started tanking. So I don't know if we're breaking the tanking cycle or the pre-tanking cycle. And it's going to tank more. I don't know. Here's one from someone I do know, Barclays. This is Venu Krishna. We had him on the podcast just a little while ago. It says our 2026 S&P 500 price

target goes to 7,400 from 7,000. Taking earnings estimates up. It talks about mega caps continuing to execute. Talks about the AI race showing no signs of slowing. That price target works out to 12% upside from here, almost 13%. That would be nice. I don't know if it's going to happen. Stocks look very expensive. The S&P is at 25 times earnings. I'm not predicting a crash, but I'm also definitely predicting a crash. They just happen every so often. The key is, I can't tell you whether it will be next week or next year or many years from now. Not very helpful, I know. So you either stick with the S&P 500 and hope that prices continue to climb, or you diversify into something that can give you a downside protection, but that something probably isn't doing nearly as well

as all these big AI stocks. So if you're wrong, you miss out in return. It's a pickle. I have thoughts on one way that investors can hedge their index funds, or let's say, compliment their index funds. It's a little out there. It didn't used to be, but it is now. Some of this might sound a little bit nuts. It has to do with dividends. Dividends have only been as derided as they are today once before, and that did not end gently for investors. I want to talk to you about the stock market's most important penny.

I'm referring to Nvidia's dividend. You might be thinking Nvidia's what now? There has been a lot of talk about Nvidia over the past week. The stock market had been sliding for days heading up to Nvidia's third quarter report. You can almost hear investors saying

to themselves, is this a bubble? I don't know. We'll find out when Nvidia reports. And Nvidia reported and sales of artificial intelligence chips and forecasts for more of the same, they beat estimates by billions of dollars. It was a well-received report, but it failed to send the stock market higher the following day. I want to focus on something else we learned on page one of this quarterly report. It was the answer to a question that absolutely no one has been asking.

In Video, we'll keep its dividend unchanged. Yes, it pays a dividend. In fact, it used to be a decent yielder, and the month of November, that used to be payment-raising time. But there have now been many years of stunning stock price gains and splits, and no dividend increases. So, NVIDIA's dividend payment is down to one penny per share, per quarter. That makes for a yield of 0.0002%. Let's put it this way.

If you own $1 million of NVIDIA stock, you're going to put $2 in cash in your pocket each year, unless you reinvest it into a pretty small fraction of a share. Of course, Nvidia investors are not complaining they've made 24,000% over the past decade. So why am I calling attention to this penny? It's because I think Nvidia's dividend tells a broader stock market story. Prices have shot higher for a lot of stocks.

Not quite as high as Nvidia, but pretty high. And lots of companies have skimped on dividends. And so the S&P 500's yield right now is just 1.1%. I call it finances vestigial tailbone. It's an evolutionary holdover without a clear purpose. purpose. But as I said, this is not the first time this has happened. Dividends are meant to be an important part of total returns, but they're more than that. When the market crashes, dividend payments tend to hold up much better than paper earnings. I think a lot of people underestimate the degree to which a crash in the stock market can spill over into real-world economic effects. If it's a bad downturn, that can make riding it out difficult. Dividends give savers income to use to ride out recessions and layoffs. or a means of reinvesting in their shares at lower prices. Let me explain why I think all of this matters a lot now,

and I'll give some thoughts about how to buy some dividend income. And I will come across a little bit like a guy building an arc in the desert, but bear with me. I'm going to have to do a little bouncing around in a time machine, but I will try to keep it to the past 425 years. First stop, January 1999. That's when Nvidia went public. Longtime investors remember 1999 as,

The last year of a big boom in prices during the dot-com stock bubble before it popped the following year. I have given people glimpses on this podcast before of what this period looked and felt like. Dividends were way out of fashion. It felt like the idiots were the geniuses because they were making loads of money every day. And the smart people who were worried about valuations, they were the nerds who just didn't get it. I don't think I told you before. I guess it's all right to tell the story. It's been a quarter century.

I won't give any names. There was a guy I knew in the late 1990s that picked up the nickname Tandyman. He had put every dollar he could scrape together into AOL stock, and he would never sell. Today people say Hodel, H-O-D-L, that's a misspelling of hold, and that's a war cry for holding your stocks or your crypto or your whatever to the end, no matter what happens. Ride out the dips. Well, this guy was an original huddler, but he had to pay his bills. He had to pay rent.

To top off his paycheck and get by without having to sell. any of his AOL stock, he figured out a way to use his Radio Shack credit card to get a little cash back. I do not recall the details, honestly. Tandy was the parent corporation of Radio Shack. So people who were celebrating his tremendous AOL gains would call him Tandyman. AOL stock fell apart and Tandyman lost it all. He overhauled. There was a lot of that sort of thing going on back then. I mentioned NVIDIA's IPO in 1999 to explain why this company, wouldn't have paid dividends sooner. No one was interested. Price gains were easy, and what investors wanted from their companies was to watch them reinvest their capital into building out the

internet economy. The S&P 500's yield would go on to bottom out around 1.1%, where it is now, in other words, and dividend payments would fall below one-third of earnings. The average over the past century is more than one half. The following year, the bubble popped, the S&P 500 lost half its value, and the NASDAQ composite. That lost three quarters. That NASDAQ index doesn't include dividends and it took 15 years for it to get back to its 2000 peak. Okay, back into the time machine. We're headed to November 2012. Exactly 13 years ago, Nvidia reported quarterly earnings, just like this past week, only there was no mention of artificial intelligence, just video gaming and a little side hustle in supercomputing, and Nvidia was trying to figure out a way to gain share in mobile devices.

The results were decent. There was a rising cash balance, but the stock price was wallowing at less than half, its 2007 high. It just so happens that dividends were cool again, so Nvidia launched one that was chunky enough to put its yield immediately at 2.4%. And the stock gained 8% in a day. Back in the machine. And really pull that, ever because we have to go all the way back to March 1602. I'll make this quick. A bunch of trading companies merged to create a company that I can't quite pronounce because my Dutch pronunciation isn't great, but the initials of the Dutch words are VOC, and you probably know it better as Dutch East India Company. There had been joint stock companies before Dutch East.

The way they worked is they raised fresh capital for each trading voyage. Then they returned, and they split the winnings right at the dock. Dutch East came up with a financial innovation, dividends. The company would make cash payments to shareholders, but also retain and recycle some capital. That made it a perpetual stock. And one of those needs a place for trading, so investors created the world's first stock exchange in Amsterdam.

The point of this is that dividends gave birth to the stock market, not the other way around. I think the modern accounting and pretty high, levels of investor trust have reduced dividends to a sideshow but they used to be the whole point okay we have one more stop this one is november 2019 and this was the first november since video launched its dividend that it did not give shareholders a raise why the stock price had been rocketing higher for years on this growing realization that the highly parallel computing that was used to draw video game pixels was a good fit for artificial

intelligence, too. The earnings call was filled with mentions of AI and hyperscale data centers. Dividends didn't come up. Okay, let's power down the time machine. By now you may be asking, who cares? It's a fair question. Invidia, since it stopped growing its dividends, has spent massively on stock buybacks. Not quite enough to meaningfully reduce its share count, but still. And more importantly, the S&P 500 over the past decade has returned 278%. There's a subset of that index that follows companies that have many years of raising their dividend payments. It's called the S&P 500 dividend aristocrats. And if you own that one instead, over the past decade, you lagged behind by more than 100 points. So why should we care about dividends?

Well, first, that underperformance for dividends has a lot to do with recent valuation bloat for the stock market. The S&P 500, as I said, has plumped up to 25 times projected earnings from 19 times three years ago. So if you invested instead in that aristocrats index at its inception, just over 20 years ago, and you checked in on your account three years ago, you would have made 402% and beaten the S&P 500 by 80 points. Anybody can cherry pick a period where a given investment strategy worked well. But this one is no anomaly. From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year. That's almost six percentage points a year better than returns

for non-payers. Companies that cut or quit their dividends had negative average returns. That's according to data compiled by Hartford funds. Since 1960, dividends have contributed 85% of the S&P 500's total returns. I know that figure sounds absurdly high. It has to do, with the long-term power of compounding. Most people don't have, what is that, 65 years? Most people don't have 65 years to invest. But even over intermediate periods, the compounding power of dividends adds up.

If you look at average returns by decade since 1940, during the average decade, dividends kicked in 34% of total returns. This is a lot of numbers, I know. I'm going to give you one more set of numbers because this set is maybe the most important of all. It has to do with what happens during big stock market downturns, 10% or more. During downturns like that since 1975, companies that paid dividends lost an average of 14.4%. The S&P 500 did 5.5% worse.

Companies that don't pay dividends did about 14 points worth on average. In other words, the non-payers fell twice as much as the payers. That's really where dividends shine brightest is during downturns. We're at the point where the market's dividend yield has matched its dot-com bubble low. Because companies are allowing their earnings to grow much faster than their dividend payments, we will soon breach that era's payout ratio, or dividends as a percentage of earnings. In other words, it's a stingy world for investors looking for dividend income. You can buck the trend.

For example, there's an ETF based on that dividend aristocrats index, The ticker is N-O-B-L. It's from pro-shares. It's, let's call it a step in the right direction. The fund yields 2.2%. It costs 0.35% a year. It's a little much for a cheap skate like me, but it's not terrible. This one might be better. Schwab, U.S. dividend equity, the ticker there is SCHD. That's based on an index that basically screens for sustainable yield using a more rigorous approach. that portfolio yields 3.8% and it costs just 0.06%. That's more in my price range. Two things to stand out to me about that portfolio is it's not super duper loaded up obviously on big tech, but also on finance. A lot of value funds are stuffed with banks. This one isn't and of course you get a lot more yield. The other thing that stands out, remember the S&P 500,

25 times earnings. This dividend portfolio traded recently at a PE ratio of 16.7. That's pretty close to the long, long-term average for U.S. stocks. By long, I mean around 125 years. It gets iffy because there are new ways of measuring earnings that have popped up over the years. And also it depends a lot whether we're talking about trailing earnings or estimated earnings for this year or next four quarters. But in the back of my head, I think of 15 as around the historical average price earnings ratio for the U.S. stock market. So this one's not far above that at a time when a lot of other stuff looks expensive. That's it. I don't add a lot of stuff to my investing approach. I have described my stripped down financial nudism philosophy on this

podcast before. But dividends are one thing where you might have to force the issue a little bit. I think they could really come in handy if the stock market doesn't do as well as we hope in the years to come. By the way, I realize I've made comparisons between now and the dot-com bubble and I realize that companies are very far removed from those conditions in terms of their financial situation. They are profoundly profitable. I don't think it changes what I said about dividends. But just to give you a sense, Wall Street estimates that Nvidia will generate over $93 billion in free cash flow this year and $151 billion next year. That's a shocking amount of money. Vivida has already passed Microsoft in free cash flow. If those estimates are accurate, it will soon pass Apple.

The company, of course, needs to invest some of the money it makes into with chip technology. We've had co-founder and CEO Jensen Huang on this podcast. He knows a heck of a lot more than I do about how best to invest money in chips. But those monstrous free cash flow numbers I just cited, that's after yearly capital expenditures of only around $5.5 billion. And the dividend, that costs just a billion. Let's take a quick break. That was a rambler, I know.

When we come back, we're going to hear about some. non-AI stock picks. We'll hear from a researcher at B of A Securities who has assembled the big brains over there to figure out which stocks they like the most that have nothing to do with machine learning, large language models, even medium language models, I think.

We'll be right back. Welcome back. B of A Securities recently published a note titled When the spotlight becomes too hot, opportunities away from AI. My interest was piqued. I want to hear about some opportunities away from AI. We reached out to T.J. Thornton. He's the head of research marketing at B of A Securities.

It puts together theme reports calling on analysts from different groups. There are 16 stock picks in total in this new report. In a moment, you'll hear part of a conversation where I list all of them and mispronounce one. But first, let's hear TJ give a couple of quick details. on a few of the picks. Starting with Eversource, the ticker there is E.S. That's a regulated utility in Connecticut. There is a company-specific story here, and that is that the regulatory environment in the state of Connecticut is sort of getting less onerous. Next up is a mining company, Freeport McMoran, the ticker there, FCX.

Freeport actually does have a bit of an AI angle, given that they are a copper miner. It just happened that it wasn't trading like an AI stock because they'd had this mine. disaster. So it's kind of an interesting one where maybe they're not getting a whole lot of credit for this indirect exposure to AI. B of A is bullish on copper and they recently upgraded Freeport to Buy. A third stock, Key Corp, ticker there, K-E-Y. That's a bank that's definitely not defensive that's going to be cyclical and highly dependent on what happens to the U.S. economy. But our analysts view is that that's actually what makes it interesting, is that, you know, If you get this broadening and you get an improvement in capbacks and M&A,

and we've already seen some of that, especially on M&A, that stock will work. There are more stocks than these, and T.J. had some things to say about the research more broadly. Here's part of that conversation. You've published a piece of research here. It's kind of, is it a reverse theme? Is it an anti-theam? The theme is what it's not, and it's not AI stocks. It's stocks that are expressly not in AI.

They have little or nothing to do with AI. What's the purpose of this piece of research? Why is that an important thing to put out now? Is it a way to complement the exposure you have and maybe your stock index funds? Yeah. I mean, I think there were a lot of reasons why we did it. I think one is that we all know the AI stocks pretty well, right? Yes, there's some value in talking about Nvidia and the quarter and what we think.

I've heard of that one, yeah. But that gets a lot more exposure than stocks that don't fit that. AI theme. So there was a view that maybe generally in the market, these non-AI stocks are being sort of neglected. And because there's so much interest in the AI stocks, but, you know, if your view is that we're sort of closer to the end of the AI trade than not, you know, stocks that don't have exposure to AI, maybe one's worth looking into. On the report you published 16 bi-rated stocks that came up on the list, I'm going to run very quickly through the names. We won't go into detail about them, but Amcor, AT&T, BGC group, Church and Dwight, Dollar General,

Eversource Energy, Freeport McMorrin, Henry Shine, J.B. Hunt, Key Corp, McCormick, Oniac, progressive Regency Centers, Viking Holdings, and Walt Disney. As you put the group together, what stands out about the list? Anything, I mean, like, what is the market that's the non-AI part of the market look like right now? I presume it has to be cheaper. Does it maybe have a bigger dividend yield? What stands out to you about, if not this list in particular, the non-AI portion of the stock market right now? So, you know, there are different attributes in that list. You know, we could have also said, all right, well, we're also looking for defensive names.

Because if you think that the AI bubble will burst, the market will probably sell off and probably defensive names will act best. But we didn't do it that way. You know, we didn't look for expressly a defensive list. There are definitely defensive names on that list. It sort of runs the gamut. And I think the idea with the list, too, was not to put out a portfolio. It was more to say, look, here's your big list and here's your, you know, smaller list of 16 stocks. And within that, depending on what your orientation is, if you're looking for defenses,

if you're looking for something that's got a bit more cyclicality, you know, you should be able to find some things. At the time that we're talking, we've seen the stock market in the U.S. wobble for a few days. And investors are wondering, is this the big tech downturn? We've been waiting for the AI tumble, or is this just a pause and we're going to continue forward from here? And we're waiting to see, what's the consensus over there about? Is the stock market in the U.S. still an okay deal for investors? Shouldn't investors be reasonably optimistic about the path forward for stocks? Yeah. So I believe you've had Seveda, our U.S. equity strategist on this podcast in the past.

still reasonably optimistic. She's got kind of a 12-month target that, when we talked about this a little bit in the piece, offers about an 8% return, which is about an average return. She has tended to prefer this sort of broadening story, which this has worked very recently in the month of November, but, you know, previously really hadn't because it's been so dominated by the mega caps. So that's where she is. So she's reasonably optimistic, does prefer sort of the average stock to the index because she thinks that on the AI side, things have gotten a bit overdone. I mean, she's mentioned the fact that capex to operating cash flow for the hyperscalers is basically at the same level as it is for the U.S. oil majors on a percentage

basis. So they're becoming very capital intensive. And, you know, her view is that the multiple are too high in light of that. And so I think it's all consistent with this piece, which is, all right, well, if these are stalling out, you at least want to want to look elsewhere. And I think another interesting thing in the markets over the last several weeks has been that, you know, even within Mag 7, you're seeing a lot of differentiation. I saw the couple of weeks ago, Amazon talked about how this, our cloud business, we're seeing tremendous growth. It's a direct result of AI. This money that we're spending is making money right away. It's being put to great use. Investors cheered the stock went up a lot. Meta came along

and they said, we think we're seeing maybe the beginnings of some return of this AI spending in our core business. We think, I'm paraphrasing, of course. And then they say, by the way, we're going to spend a ton of money going forward. And investors just were not having it in the stock tank. So to your point, yeah, some real differentiation going on there. Both saying the same thing. They're going to spend a lot on AI. But investors seem to want to see that money being made sooner rather than later. Right, exactly. And so, you know, I think that's an argument for stock picking that it's not just about picking a theme broadly and owning all these mega caps. And that gets to sort of Savita's point, which is that, you know, CAPX is high. And so if there's not a line of sight to those returns, it's maybe a more difficult case that you've got as a stock. And of course, you know, I think some of these other MAG7 stocks that do have cloud businesses, right? I mean, Amazon, Google, those cloud businesses are viewed as big beneficiaries as well. And, you know, Matt, it doesn't have that. I want to ask you about something.

This is not from your report on non-AI stocks, but it's just on my mind. And maybe you have thoughts. Maybe you don't. But it's about dividends. It's about dividend investing. I feel like dividends just seem to be hopelessly out of fashion, out of favor. Like no one cares. You know, it feels like, you know, one of these, what are they call them, vestigial organs,

like the tailbone or something like that. Like, no one can quite remember why this thing is still around or what it used to do. But once in a while, you get a head. headline. Like I saw that Disney had results. Disney is one of the stocks in your list. They had results recently. Disney, you know, stock has been, I guess, a little out of favor for a while. And they had results. They said, we're going to raise our dividend payment by 50%. I thought, that's great news. Kind of what companies do now when they have to sort of sweeten the appeal for shareholders. So I looked at what the yield is going to be with a new dividend. And it was like, I don't

know, 1.4-ish percent. So it's still pretty low. I think the S&P 500 dividend yield is in the neighborhood of 1% or recently was even a little smaller. It's like the lowest in decades. And yet, I can't help but feel the dividends are like the answer to investors' anxieties right now. Like if you thought the market was going to go lower, and if you had a portfolio with a decent dividend yield, you could continue reinvesting those dividends at lower prices. What do you make of dividends and their importance for investors? Should anyone care? Should anyone care about whether a company has a dividend yield right now? Yeah. And it's a fair point. And, you know, One Oak, which is actually one of the names on the list, does have a decent yield and has been a laggard, not surprisingly.

So, yes, nobody has cared. That's got a compelling dividend on yield. It's just to continue to go down. One Oak, of course, when I said it, I said, Oneeok. So we'll leave that in for, I deserve that. I think that's a state school in upstate New York. Sudiote. But no, I think, well, look, one interesting point, Michael Hartnett,

publishes his fund manager survey once a month. And, you know, one of the points that he made when he published based on the latest survey is that for the first time, really, in the history of the survey, people think that companies are over-investing. A net 20% of respondents said, we think companies are over-investing. And actually, historically, they tend to think that companies are under-investing. And the antidote to that is that they think that companies are over-investing. And the think that companies should focus on balance sheets. So, you know, I don't know that they would necessarily say that dividends are the way to go, but I think that this idea that companies are spending too much on growth, if that indeed gets some traction as it seems to be starting to,

there may be a shift back to dividends and buybacks and, you know, some of the things that historically have been really important when it comes to the total return of the market. Thank you, T.J. If you have a question, you'd like played and answer it on the podcast, you can send it in. It might be in a future episode. Just use the voice memo app on your phone. Send it to jack. How, that's H-O-U-G-H at barons.com. Thank you all for listening. Shout out to Sunni-O-Nioc. Go Fighting Woodchucks. Alexis Moore is our producer. You can subscribe to the podcast and Apple Podcast, Spotify, wherever you listen. If you listen on Apple, you can write us a review. See you next week.