Today is Dividend Day.
The series where I teach you 5 things about dividend investing in less than 5 minutes.
1️⃣ The S&P 500 Has a 63% Payout Ratio
The red line in the image shows the growth of corporate earnings.
The blue line shows the percentage of cash these companies are returning via dividends and buybacks.
That ratio has gone from 80% to 90% down to 63% today.
2️⃣ AI Needs to Become 9% of the Economy
A Columbia/Brookings study estimated that AI needs to become 8.8% of the entire US economy for an adequate return on invested capital.
That is about what the country spends on food.
It’s growing quickly today, but the question is for how long and how big will it get?
Computer prices fell for 50 straight years, and spending grew quickly, at first.
But it plateaued in the 1980s near 1%, and never went any higher.
3️⃣ An Investing Quote
Aswath Damodaran is a professor of finance at NYU Stern, and is considered an authority on corporate valuation.
Damodaran has a big focus on capital allocation, and a simple rule about growth:
"Growth is not always good. A company that grows by reinvesting capital at returns below its cost of capital is destroying value, not creating it."
— Aswath Damodaran
4️⃣ Financing the AI Buildout
Here’s the paper referenced in point 2, written by Columbia professor Stijn Van Nieuwerburgh.
With hyperscaler capex growing above operating cash flow in 2026, tech giants are pushing billions in debt into off-balance-sheet SPVs and private credit.
This paper is an important read on the hidden leverage and capital cycles funding today's market.
5️⃣ Example of a Dividend Stock
Kroger is the biggest grocery chain in the United States.
They sell food, prescriptions, and fuel across a nationwide store network, operate private-label food manufacturing and in-store digital advertising.
Key numbers from Fiscal.ai:
Profit Margin: 0.7%
Forward PE: 11.7x
Dividend Yield: 2.3%
Payout Ratio: 82.4%
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
P.S.
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Love this quote by Damodaran:
“Growth is not always good. A company that grows by reinvesting capital at returns below its cost of capital is destroying value, not creating it."
A good story that is somewhat analogous is the one about the struggling baker. He went to his friend the butcher, considered a numbers guy, to find out why his business was doing so poorly.
The butcher looked over his books and it all became crystal clear. He cleared his throat, and said gingerly:
“Your problem is your cost of goods are higher than your sales price.”
The baker responded quickly and confidently:
“That’s ok though — I’ll make it up in volume!”
I really liked the food comparison. Saying AI needs to reach about 9% of the economy, close to what the country spends on food, made the size of it easy to picture.