The Dividend Cafe - Thursday - June 25, 2026

Episode Date: June 25, 2026

Brian Szytel hosts Dividend Cafe on Thursday, June 25, describing a mixed but slightly positive market with a growth-to-value rotation as equal-weighted indexes outpaced cap-weighted, rates dipped, and oil rose slightly while Brent returned near pre US-Iran levels; despite one major AI semiconductor earnings beat lifting parts of the space, much of tech was down. He reviews heavy economic releases: May PCE inflation met expectations (0.4% headline, 0.3% core; core PCE 3.4% YoY), Q1 GDP was revised up to 2.1%, jobless claims beat expectations, durable goods fell as expected, and personal income and consumer spending exceeded forecasts, with five of six items better than expected. He highlights dividend growth using a 2000 S&P 500 example where a 1.2% yield grew to about 5.5% cash-on-cash over 26 years, and discusses private credit redemption gates, diversification, and software-sector stress as a key risk versus a systemic collapse. 00:00 Market Snapshot 01:03 Economic Data Rundown 02:36 Value Rotation Drivers 02:45 Dividend Growth Power 04:36 Ask TPG Private Credit 05:11 Run on Bank Explained 06:49 Wrap Up and Weekend Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome to Dividend Cafe. This is Brian Saitel with you here as your host this evening, which is Thursday, June 25th on a bit of a mixed market, but skewed to the positive. And there's a lot of reasons for it. We got a whole lot of economic data out today in the calendar. And I'm going to go through that with you in detail. What we've seen this week in volatility around technology, we actually had one of the largest AI semiconductor companies report much better than expected earnings today, which drove the whole space a little higher, although not in unison. It was a little mixed, and most of the technology complex actually was lower on the day. So when you look at the equal weighted S&P was outpacing the cap weighted by over 100 basis points, it's that traditional growth to value rotation that we've talked about quite a bit. But that was what was going on. Underneath the market, interest rates came down a little bit. Oil ended up coming up just slightly,

but is still close to that low $70 range. And Brent is actually back to or close to what it was before this U.S. Iran ordeal took place. Those are broad strokes on markets, but let me pull it back a little bit and just go through the economic side of it because, again, like I said, there was a whole lot out there. So bear with me here just for a minute. The first item that we got really was the PCE number, and this is an inflate. read personal consumption. The number was in line with expectations. We had a 0.4 for headline for the month of May, and then we had a 0.3 for core when you move out energy and food from it. So that puts core PCE now at 3.4% year over year, arguably quite a bit above the Fed's 2%

target on these metrics, but albeit somewhat moving back in the right direction is the way I described that. We also had a final revision on Q1 GDP. This came. up substantially. This was 1.6 previously. They moved it up to 2.1. That's a much better read on Q1 GDP, so that's good news. PCEI would chalk up to good news as well. The third point was jobless claims. They were better than expected, 215 versus 223. So now I'd call that 3 out of 3 so far, positive. And then you had durable goods orders that were down slightly 4.5%. That was actually in line with what was expected. We knew the number was going to be negative. Then you had personal income more than forecast, which is a good thing, was 0.7 versus 0.4. People are making

more money. And then consumer spending, of course, when you make more, you spend more, also beat by 10th at 0.7. So all that to say, we had 1, 2, 3, 4, 5, 6 items out in the economic calendar that almost never happens. And I'd say 5 out of 6 were better than expected. What that did was broad-based market participation. The Dow was up-pacing the NASDAQ by over a percent, more that value tilt again. But what I wanted to get across today was less about AI, less about tech versus value, and more about dividend growth. I have a chart that I thought was really a good one. If you look at the starting point on the S&P 500 in the year 2000, and if you were an investor there and you invested X amount of dollars, let's say it was a million dollar investment in the year 2000,

the dividend yield then was about 1.2%. So if you were an investor back in the year 2000, And let's say with a million dollars in the index, we know, if you recall, that was the height of the tech advance and ultimately demise from the year 2000 and 2003. So we know what the index did. But the dividend yield at starting point in 2000 was 1.2%. So let's call that 12,000 on a million. Not much. Actually, similar till today, the S&P 500 dividend yield is also right about that level. And the market has run up in a similar fashion.

We won't know exactly how it will play out. But the point is, if you started at that point, we'll call it. not ideal timing. You had a dividend yield that was small and poultry, but it actually grew and it kept growing and growing over the years. And so 26 years went by. Your cash on cash investment yield now is 5.5% in that scenario. So you started at 1.2%. You basically had a 5x on your dividend just from the dividend growing over the time. Index ended up recovering, but sure, it was a bumpy road for about 15 years. But the point is, a 1.2% yield turned into a 5.5% yield cash on cash. That's just the index. Now imagine if you had a starting point yield of 3.75% instead of 1.2, and you 5xed that.

That would be quite a cash generating machine indeed. And of course, that's the power of dividend growth and also I happen to know a shop that has a dividend portfolio that has a starting yield at 3.75%. But that was why I have the chart there, and that is why I think it is relevant. And if you have questions on it, please let me know. There was a few different questions that came in on the Ask TPG side today. And so I want to walk through one of those for you here today. This was the question about a run on the bank. The old idea in the 20s were too many depositors try to withdraw funds at the same time.

The bank doesn't have enough cash to provide, and then it closes shop. Remember, banks are levered. And he was asking that about private credit. Is it something similar? Private credit is having some duress and some stress. We know this because there's gated redemptions right now across the board. Morgan Stanley was the latest firm to gate the redemptions on their fund just as of this week. So what's going on here, and is it like a run on the bank?

Here's the deal. Private credit funds, for the most part, are hyper-diversified. Some of them are fund of funds, even, so they're incredibly diversified. So it's a little different than a bank. It's a loan fund. It's a pool of loans. And one of the protections on a run-on-the-bank, so to speak, would be the diversification factor. So there's that.

The second thing is that they've de-designed these to have just a 5% maximum redemption amount each quarter. So by design, it's going to protect the sure-hundred. holder value because not everyone can take all the money out at once. So that is by nature just going to protect against a run-on-the-bake scenario from that standpoint. And what's really going on in private credit is stress in the software sector and the concern that those companies that have borrowed money from private credit, lenders are not going to be able to repay it at these really high interest rates. And what I'll say to that is if you look at across the entire private credit space and you look

at all software companies, revenue of those companies is still growing at about 10. 10% on average. So it's hard to really say you're going to trip loan covenants and not be able to repay things when the money that you borrowed is better to be paid back with a higher revenue stream at 10% in a terrible environment for software that it is. So I'm not seeing something systemic, but I say that is the risk for private credit. Less about individual loans and less about individual lenders and more about if something systemic happens. In other words, during the GFC, you could say some mortgages weren't bad. That's true. But since some were bad, the whole thing ended up moving lower, and that's a systemic collapse.

We're not seeing that in private credit, but that would be the risk that I'd point to more in these funds these days than the individual loans themselves. So that's my Around the Horn. Like I said, a lot of stuff in the econ calendar for today. A lot of other comments around dividend growth as well. I hope you enjoyed it. Reach out with questions. I always appreciate them.

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