Today is Dividend Day.
The series where I teach you 5 things about dividend investing in less than 5 minutes.
1️⃣ Utilities and The Mag 7 Now Move In Opposite Directions
Through 2025, utilities and the Magnificent 7 stocks traded together.
Utilities were seen as beneficiaries of the AI buildout.
But in 2026, that correlation has completely reversed.
2️⃣ Bonds Now Yield More Than Equities
The 10-year Treasury yield (5.24%) is above the S&P 500's forward earnings yield (5.01%).
The earnings yield simply measures how much companies are expected to earn relative to their current stock price (the inverse of the P/E ratio).
Because the 10-year Treasury pays more than the stock market's earnings yield, the risk premium for stocks is now gone.
If Treasury yields keep climbing, either corporate earnings must rise rapidly, or stock prices must fall to make stocks competitive again.
3️⃣ An Investing Quote
Warren Buffett knows the importance of interest rates.
When they go up, it changes the return investors (should) demand from stocks.
“Interest rates are to stock prices what gravity is to matter. If interest rates were nothing and they’re going to be nothing forever, you’d be buying stuff that would yield you one percent or two percent.”
— Warren Buffett
4️⃣ An Investing Resource
If you want to know how to think about the earnings yield on stocks versus the risk-free rate, we can look to the father of value investing.
In The Intelligent Investor, Benjamin Graham said that a defensive investor should demand an equity earnings yield that is at least twice the AAA bond yield.
If you want a full summary of The Intelligent Investor you can get it here.
5️⃣ Example of a Dividend Stock
Southern Company is a recently crowned Dividend Aristocrat.
It’s a large, diversified company managing traditional electric utilities across multiple states as well as nuclear, solar, and natural gas assets.
Key numbers from Fiscal.ai:
Profit Margin: 15.2%
Forward PE: 20.1x
Dividend Yield: 3.2%
Payout Ratio: 66.6%
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
P.S.
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