The Dividend Cafe - Tuesday - May 26, 2026

Episode Date: May 26, 2026

Brian Szytel recaps the first trading day after Memorial Day as markets mostly rose despite fluid US-Iran geopolitical headlines, with the S&P 500 and Nasdaq closing at fresh record highs while the Dow finished slightly lower after recovering from deeper losses. He notes strong rallies in semiconductors and AI-related tech, warning of potential exuberance as charts look parabolic, alongside lower oil prices and a drop in the 10-year yield to 4.49%. Economic updates included consumer confidence at 93 (above expectations) and a modest softening in the Case-Shiller Home Price Index, which he attributes to affordability pressures but suggests a 2006-style collapse is unlikely due to supply constraints and high homeowner equity. He also addresses why S&P 500 dividend yield is lower, discusses the nuances of buybacks versus net share issuance, and explains a preference for rising dividend income over buybacks. 00:00 Welcome Back Overview 00:27 Geopolitics And Market Reaction 01:02 Tech Rally And Exuberance 01:36 Oil Rates And Deal Odds 02:38 Record Highs Year Context 03:09 Economic Data Confidence Housing 03:39 Housing Market Why Softening 04:29 S&P Dividend Yield Question 06:03 Buybacks Versus Dividends 06:58 Wrap Up And Disclosures 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. Good evening and welcome back to Dividend Cafe. This is Brian Saitel, your host this evening here on the first day back after Memorial Day. And I hope everyone had a nice weekend and good day off and enjoyed markets being closed over the weekend. We got several different news fronts over the weekend on the geopolitical landscape between the U.S. Iran. And originally there was a deal that looked like it was going to happen and then that was taken off of the table sometime yesterday and nonetheless futures were up and markets actually ended up closing for the most part higher on the day. The Dow was still lower on the day by about 70 points,

but it was lower on the day by 300 points earlier. So it really came off the lows. But both the S&P 500 and the NASDAQ were quite positive. S&P was up about two thirds of a percent. Nasdaq was up about 1.2%. So this is very much let the good times roll with the semis and a lot of the tech and AI related names that rallied today quite a bit. Some of the semi names were up a ton, 15, 20%. So some of this stuff is getting to the level of exuberance, at least on the semis side, if you look at most of the charts and you can just look up top five semis or AI related semi conducting names, and all the charts look basically parabolic. So where that will end, I wish I could tell you, but buyer beware is the only thing I would recommend on that particular trade at this point.

But that aside, again, positive day in markets overall. You also had oil down on the day. So you had Brent just off a little bit. And then crude WTI was down about 3%. And so you had interest rates that moved a little lower. Those two things are correlated. So 10-year was down seven basis points on the day to 449. So as far as a deal getting done, your guess is as good as mine.

between the U.S. and Iran and what that ultimately means. My feeling is that the market is pricing and that something does get done, but that's just because the belief is that this administration doesn't have the time that it might take to do it another way other than a deal. And so the question will just be the devil and the details on how that shakes out.

But the news media is talking about what things should be and what Trump might think or what he may do, but ultimately, really, they don't know, nor does anyone else. I'm not even completely convinced that Trump himself knows, necessarily at this point. So it's a fluid situation. Markets are going up and down in the meantime. The fundamentals have just been so positive. They're pun intended, basically trumping all of this other information out there, as you know. So that's really what we had on the day. This is going to be a shorter podcast because there's not a whole lot for me to sink my teeth into. The last thing I'll

say on the market movement is you did get fresh record highs to close on the S&P and the NASDAQ. And they give you context for the year. S&P is up almost 10% now on the year and NASDAQ is up almost 14 and a half percent on the air. So this has been a pretty decent move in the wake of what is otherwise higher inflation, which is bad, higher interest rates, which are deemed bad, a new Fed chair and also a war going on in the Middle East and oil prices that have gone up 30 percent. Two things in the economic calendar, though. We had consumer confidence, better than expected, came out of 93. We were expecting a 91. It was lower than what April was revised up to, though. And again, we look at this as more a lagging indicator. Nonetheless, that's how people are feeling.

And then he had the Kay Schiller Home Price Index. That was down two-tenths for March. And remember, it was down one-tenth for February. We're in May. So these are a little old and stale, frankly. But nonetheless, housing prices are softening a little bit. That's normal because affordability is just so stretched. And interest rates are higher than they used to be. And prices are higher than they used to be. And the reason is because we've underbuilt the housing stock in the country for 60 years. Number one, so there's a supply and a demand imbalance. A little co-hol called the millennials are forming households these days and buying homes and such, and there's less of them than there used to be. That's one reason as a percentage of population. The other reason is that inflation has been higher, and so you've got the stuff that builds the house costs more, and hence that gets flown into the prices of it. And then, of course, you know, everybody or most, at least, especially new home buyers, will finance the transaction, and those financing costs are higher than it used to be, so. It makes sense that the home prices are going to calm down. As far as them falling off of a cliff like it did in 2006, I'd be surprised because of those other reasons.

The other real reason, though, is that there's just a lot of equity now, a whole lot of equity. And protective equity is the solution for a real housing market, completely falling out of bed like it did back when leverage ratios went upside down and that housing collapsed back then. The question in there today was about the dividend yield on the S&P 500, when you consider the historical reference to it is one of the reasons because of the increase in stock buybacks. The one thing that will say is, and this is David's answer, you need to be aware that when they're buying back shares on one hand, they may be issuing shares in other areas. Employee compensation, different transactions, they might be financing with equity, some other dilutive things. So it's always important to really

look at what the net amount of new share issuance is. And oftentimes you'll find that even when they're quote-unquote buying back shares because they're issuing it other ways, the net result is that they're still having more float, more shares out on the market. So just keep that in mind. You can look at the dividend yield or the total yield of the net amount of buybacks and also the dividend yield, and that's a calculus that we can look at. But the reality is the dividend yield on the S&P 500 is lower for many reasons. One, it's appreciated here for the last 10 years. And so it's gone up in value more than the dividend has grown. And so that means the yield is compressed. The other part, and I've talked about this, is that the composition itself has just

shifted into lower dividend paying percentage cohorts, call it technology names that technically pay less in dividends. So there's a couple of different things going on. But stock buybacks, it's not necessarily a form of returning capital to shareholders, if that's what the writer was getting out of the question being asked. Like, if you own 100 shares of XYZ company and they're buying back shares, does that just give you money in your account? It doesn't. You'd have to be buying your shares back and you'd, of course, have to be willing to sell them. It's more of a form of executive compensation than anything else. Are we fans of it? Look, I think it can be supportive of stock prices, potentially if it's done correctly. I also think it can give confidence in a name

if it's hyper depressed when you have, especially insiders, buying back shares and buying shares. But as far as proper stewardship, obviously, we're biased. We prefer, you know, a rising dividend an income stream coming back to shareholders versus buybacks, which largely are geared towards trying to raise the stock price specifically for C-suite level compensation reasons. And so there's a conflict there. Something to be aware of. But those are my answers for today. And there's my around the horn.

I'm going to let you go for this evening. Reach out with questions, please. They're always good. We'll talk to you soon. The Bonson Group is a group of investment professionals registered with Hightower Security's LLC, member FINRA and SIPC, and with High Tower Advisors, LLC. a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC.

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