The Dividend Cafe - Thursday - September 24, 2026

Episode Date: September 24, 2026

On Thursday, Sept. 24, Brian Szytel recaps a down Dow day with the S&P and Nasdaq flat as markets rebounded late on optimism about U.S.-Iran talks potentially easing the Strait of Hormuz situation; WTI still rose about 3% to roughly $95. He highlights the bigger story as higher interest rates, with the 10-year yield up another 10 bps to about 5.21% and up 120 bps year-to-date, arguing media may be overstating it and noting long rates also reflect growth expectations, strong earnings, and economic activity, while higher rates also boost interest income to savers and the economy. Economic data included better-than-expected initial jobless claims (197k) and stronger new home sales (684k). He also addresses international dividend stocks, noting foreign withholding taxes can be offset via foreign tax credits, but prefers U.S. dividend growers due to steadier dividend policies and less sector concentration than Europe/Asia. 00:00 Market Close Recap 00:38 Oil Surge And Rate Shock 01:31 Why Long Rates Rise 03:01 Higher Rates Upsides 04:10 Economic Data Check 04:54 International Dividend Stocks 05:50 US Versus Overseas Dividends 07:43 Wrap Up And Sign Off 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, your host this evening, Thursday. It's September the 24th. On a day that ended up down on the Dow, we were down about 160 points. SMP was flat, NASDAQ was flat. Market actually came up off of the lows pretty meaningfully before the close, the last hour retreating on. on some positive momentum in talks between U.S. and Iran and a phased-in potential deal to get the

Strait of Hormuz opened for removal of the blockade, so on and so forth. At least those talks are happening as far as what ends up of them. Time will tell, but some talks are better than no talks. In other words, so markets tended to like that. That said, WTI was still up on the day. We were up about 3%. We're at about 95 now in WTI. But the bigger news was really on interest rates. I talked about yesterday the backup in interest rates. We got more of that today. So I'll follow through. The 10 year was up another 10 bips. We're now at 521 on 10 year yields. And while that's higher than the last 20 years, because it is, it's basically back to longer term averages, number one, and I'm not making light of it. The rates have gone up. This year, the 10 years up 120 basis points on the year.

So if you think about roughly 4% to 520, that's a 30% move in interest rates. So it's meaningful. That said, it's not like we haven't gone through that before. In 2022, the 10-year yield went up 250 percent, but it more than doubled. Of course, that was a big year of the Fed raising rates, but my point is just, I think the media is blowing this little bit of proportion. And what I wanted to talk about was that longer-term rates are a reflection of longer-term growth expectations, too. It's not just that the bond vigilantes are out there chopping wood at the long end of the curve and trying to punish the government because of fiscal irresponsibility, I think they used to do that more.

I think the Fed somewhat neutered them from being able to do that with the size of its balance sheet, and so they're not willing to take maybe as much risk in making those long-term leveraged bets. That said, it's not just that, and it's not just that inflation is here to stay forever and forever. It's that, look, the country is growing more. Earnings are up 25% year over a year. It's a big number. There's a lot of positive things in the economy, not just AI, but the CAPEX around it, infrastructure build out. There's an energy story that people don't really talk about.

One of the Ukrainian and Russian benefactors and now also the Iranian choke point in the strait has been a benefactor, you know, has been a beneficial for the U.S. energy paradigm pretty much across the board. That's everything from diesel. We're refining more in percentage capacity terms than we ever have before to try to flood assist the world with. diesel. There was talk of an export ban, and I think it's a horrific idea for this country. Again, I might talk more about it on another dividend cafe as to why, but it would likely have the ultimate, the opposite effect of what they would hope for, which is that it would cause prices to go much higher. And it would also help the rest of the world use other sources of energy than the U.S. and I'd prefer them to get it here. But that aside for a moment, the idea of longer-term rates

being negative also has positives to it. Number one, like I said, is growth. And number two, I do think people forget that the interest income that the government sends to people that own treasuries and money market funds in this country is billions and billions of dollars going into being pumped into the economy. And so that interest income is greasing some of the wheels of the economy as well for savers. Savers were unrewarded for a generation and now they're finally being rewarded with a whopping 2% real rate. So inflation's call it 3 and you're getting a 5% yield on a treasury or a percent yield on a money market. At least it's a positive real return. So keep that in mind, give and take with this stuff. And like I said, there's no free lunch. Just wanting lower interest

rates for the sake of it, maybe you're a big real estate person and you just like lower borrowing costs, all good. I get it. People talk to their own book. I think this administration does the same. The current leader of this administration happens to own a whole lot of real estate. So I understand that there's a tendency to want things that are good for your own assets. Put that aside for a second. Just take some of the stuff with a grain of salt. A couple of things in economics calendar, but not a lot. First, initial jobless claims were better than expected. We got a 197 print and we were expecting 201. And just keep in mind, like I said, anything under 200,000 is exceptionally positive for employment. That's a very strong number. So if you couple the PMI numbers yesterday really strong across the board with continued strength and employment, the Fed's able to raise rates and the economy keeps trucked. So we'll take that. The other thing was new home sales were actually for a change, were actually better than expected. August came in at 684. We thought it would be 618. So that's a 6.5% gain versus a decline to 10% the month prior. So those are good things. Question in there today was related to international dividend stocks.

This is a question that's come up before that I've answered, but it was this particular reader is an astute person and was researching different dividend growers and overseas in Europe and such. and went on to say that he had owned some of these because of the benefits and evaluation being cheaper over there, and then the dollar may go up or down and this, they're that. My comment is, we don't rule them out. He was asking about tax complexities as well. We don't rule them out because there is tax complexities. Look, there's foreign tax withholding when you earn a dividend from Vodafone or Total Energy

or something like that or rolled that shell. Yeah, but you get that back, at least in taxable investment accounts as your forward tax credit. So that wouldn't keep us from owning these names. In fact, we have owned them in the past. We've owned European dividend payers. We've owned developed Japanese dividend payers before. But there's some differences with them. One, we are focused on quality of earnings and an ethos of growing and returning those

profits back to shareholders and rising dividends. European names and Asian names tend to set their dividend policy around a formula of free cash flow. And theoretically, it's a fine idea, setting it whatever the number is, let's say a 60% payout ratio or something like that. So if there's a macro head rent or a shock or something, you've tied your payout to something that can be hedged against an unforeseen economic event. So in theory, I understand the reality for us, though, is we believe in compounding so much. We really want management to put it out there and say, now, we're going to pay this through thick and thin. We're going to grow it through thick and thin. Business cycles and business cycles will come

and go, but our business model will be structured in in such a resilient way that it'll withstand those things and it's going to pay you along the way. I prefer that versus the formulaic approach. I see both of the logic and both sides of it, but you can get a sense a little bit on one being pragmatic, which is European and Asian, and one being a little bit more frankly American, which is just staking a claim on profits and making it happen type of thing, and we like that better. But look, the other thing is that you do get a lot of sector concentration, specifically in Europe and Asia on the dividend pairs. You end up with energy names and financials mainly. You can maybe throw in some telcos and some utilities too.

But you end up with a kind of a lower growth arena in the U.S. you can find higher growth businesses. We own a bunch of them that are still just masters at growing dividends. We just, from a bottom up perspective, which is how we look at it, when you put your thumb over the name of the company or where it's domiciled and you just focus on those things, top line revenue growth, dividend Kager, free cash flow, payout ratios. we have found a better mousetrap in the U.S. historically. It doesn't rule it out, but those are the hurdles.

Those are my comments for you today. It's a good around the horn. I appreciate listening very much, and I will let you get back in your Thursday evening because guess what? It's Thursday, and there's football on tonight. So I'm looking forward to that. In any case, have a wonderful night,

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