The Dividend Cafe - Wednesday - May 27, 2026

Episode Date: May 27, 2026

In this Dividend Cafe market update, Brian Szytel reviews a rotation day where the Dow rose 182 points while the S&P 500 and Nasdaq were flat, with the 10-year yield around 4.48% and Brent crude down nearly 5%, easing inflation and rate expectations amid ongoing US-Iran deal speculation. With little new economic data ahead of a heavier slate tomorrow (including PCE), he compares today’s AI-driven enthusiasm to the late 1990s internet boom, noting similar multiple expansion themes and index concentration, but also differences in valuations and how closely recent market returns have tracked earnings growth after the 2022 selloff. He urges vigilance as the bull market matures and argues dividend growers have historically outperformed on a risk-adjusted basis, supporting a “both/and” portfolio that combines dividend growth with reasonable AI exposure. 00:00 Welcome 00:21 Market Snapshot Today 00:55 Quiet Economic Calendar 01:11 Late 90s vs Today 01:59 Valuations and Returns 03:09 Cycle Risks and Vigilance 03:51 WSJ Question on Dividends 04:20 Why Dividend Growers Win 05:39 Both And Portfolio 06:28 Conclusion 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 Taitel with you here as your host on an update overall in markets across the board. It was a little bit of a rotation day. We had the Dow up more than the other indices. Dow was actually up 182 points on the day. SMP was completely flat and the NASDAQ was completely flat, give or take. interest rates came down a little bit. There's some continued back and forth on whether there's some sort of framework of a deal between the U.S. and Iran, and that's the story that is ongoing. But we're at 4.48 on the 10-year today. We had Brent that was down almost 5% on the day.

So oil's coming off a little bit. And with that, some of these inflation expectations, and then with that, some of the interest rate expectations as well. There really wasn't a lot of new data out on the day, so it was somewhat directionless. On the economic side, there really wasn't anything meaningful for me to go through with you today. There'll be a lot tomorrow. I think there's five different data points I'm going to walk through, including PCE tomorrow. But today there really wasn't much and it was quiet. So what I wrote about a little bit was just the comparison about the late 90s versus now,

because there's been a lot of things written about it. But there is a lot of differences. There's a lot of similarities, too. If you remember back then, the amount of CAPEX that was going into fiber optic cabling and networking to build the internet was massive. You also had the entirety of America, corporate America, rebranding all of their businesses to a dot-com, if you remember, and now it's AI. Anything adjacent to AI has increased the multiple on the company that you're running. And so they're all talking about it.

And then just the concentration of the index in one sector, which was tech. It's different now. You can look at the AI names, but also it's a lot of the semis, too. If you look at these trillion dollar valuations, a lot more of them today than there ever has been in history, of course. and some of these smaller semi-companies are now breaching a trillion. So interesting times indeed, but if you look at the multiples between the two eras, you had forward earnings that were trading higher back in the 90s than they are today. That's true.

But the delta is lower than you think. We were trading at about 24 times forward through much of the 95 to 95 era, and today we're a call it 22 times forward. So there's a delta there. There's a difference. That's a higher quality factor. But the other thing is, when you look at the earnings per share growth of market, and the total return over those five years.

In the 90s, you had the total return of the market up three times more than what earnings actually grew. So that's just a huge expansion and market run-up. One of the reasons is that you just didn't have interest rates go up much. Greenspat had raised rates, but only by about a point in a half through that whole period. That's not very much. It was already at 5% when it started. And so taking it to 6.5 would seemingly not do much, although it did cause the 2000 meltdown.

But when you look at today, you have earnings growth of about 80%, and then the total return in the market is also about 85%. So it's been pretty lockstep. One of the reasons is that you had that big reset in 2022 with a negative 18% dive in markets. So that skews those numbers. But it's a combination of this is a higher quality rally. That's true.

It's not cheap, though. So keep that in mind. And I'm not saying it's over. I'm just saying it isn't the first inning here. This is a three and a half year bull market. On average, they last anywhere from three to five years. So we're somewhere in the middle of that range. And I would just look at that historical context as far as.

is where it might go. It doesn't mean we repeat exactly what happened in the 90s. It won't be that way. Inarguably, the metrics I'm showing me here today are indicative of something that is less bubble-ish than it was in the year 2000. But that doesn't mean that excesses can't happen. And so what I said is my feeling is just that you need to stay vigilant in this market and excesses, whether it's high quality or not, there can still be excesses and we want to avoid those things. Those are my comments for the day. The question in there today was about, and actually this was an interesting question because I got this question from several different people. So there was an article in the Wall Street Journal talking about, this time is different. It's all about AI and dividend stocks aren't going to be as good as they used to be that type of thing.

And it's just sort of funny to me. First off, I just want to thank the Wall Street Journal for printing this time is different so that we can start the exact reversion to the opposite of that actually coming true because that's what tends to happen. When you say that this time is different, of course it never is. But look, the long-term returns speak for themselves. If you look at on a risk-adjusted basis, dividend growers outperform the broad market over the last 50 years and meaningfully so. That's empirical just math and numbers. But aside from that, just the value proposition of what we're talking about, these are companies that are paying out a growing revenue stream and dividends that grow on average about 6 to 8%. If you just look at the quality of those businesses, you weed out all the junk in the index because they can't pay that out like that.

and also you just get more higher durable cash flows, you get a more defensive business model, and so they tend to weather the storm a little better in down markets, and that's why the long-term numbers end up playing out that way. But my comment wasn't about performance or to be defensive against the article or anything like that. I just think it's indicative of where we are in the cycle. It also dovetails to what I wrote in there today to just be cognizant of these things. When you have the front cover of magazines or articles being written that the world is forever changed, and that maybe valuations don't matter

or they're 100 times revenue which is what most of these companies are trading at is okay and normal. That doesn't end well. And that's going to play out at some point. I don't really have anything against it or can tell you when. I just want to stick to fundamentals.

And for us, that is raising dividends. It's predictable in money that can be used. It can be reinvested and the compounding mechanism behind it is very powerful for wealth creation. But it also doesn't mean we don't own the fun stuff too. There's plenty of AI exposure and a lot of things that we do in the dividend side.

Our asset managers, for example, the largest alternative asset manager in the world is basically underwriting of all of the data center expansion with the financing that is needed or most of it. And that's exciting to us. We have the largest networking and largest IT services company and also building out their AI infrastructure. And one of those names is a quantum computing component to it as well. So I think you can have both. Your cake and eat it too.

or as I put it, it's a both-hand portfolio answer. It's not just either or. I think you can have dividend and growth, those better risk-adjusted metrics and also exposure to some of the fun stuff, but just in a reasonable way. So that's what I've got for you today. Like I said, I'll be able to get more nerdy with you tomorrow

on the economic side. Not much for me to go through today, but I appreciate you listening. Please reach out with your questions. Thank you. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC,

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