👉️ Income Now or Growth Later? The Ultimate Dividend Strategy Debate 🤔 

👉️ U.S. Stocks Fell Friday: The Impact of Trumps Tariffs On The U.S. Economy 📉 

👉️ The Profit Academy: The Investing Edge You Need To Build More Wealth 📈 

U.S. stocks fell this past Friday due to growing concerns of President Trump’s Tariff policies and their effect on the economy.

The S&P 500 fell by 1.7%, representing it’s worst day in the last 2 months, the Dow Jones also fell 1.7% as well and the Nasdaq dropped by 2.2%.

Economic reports are showing signs of slowing business activity, with U.S. services shrinking and consumer inflation expectations rising due to the potential tariffs. 

Housing sales also fell short of expectations, which was impacted by high mortgage rates and prices.

With that being said, smaller companies were hit the hardest.

The Russell 2000 index fell 2.9%.

Despite all of the noise, the stock market remains up for the year, but Friday’s setback highlights that investors are growing more concerned about the economy.

Will Trumps Tariffs Cause The S&P 500 To Plunge?

Goldman Sachs’ chief U.S. equity strategist David Kostin estimates that S&P 500 earnings per share (EPS) could fall by 1-2% for every 5% increase in U.S. tariffs.

Tariffs hurt corporate earnings as companies are forced to either absorb the higher costs, thereby reducing profit margins or pass them along to consumers, thereby risking lower sales.

On top of that, tariffs could strengthen the U.S. dollar, negatively affecting S&P 500 companies that earn a portion of their revenue overseas.

Despite all this, Goldman Sachs predicts a decline of up to 5% in the S&P 500 if tariffs persist, but they do not foresee a market crash.

High Yield Vs. Dividend Growth Growth Stocks: Which One Is Better?

Dividends have contributed about 33% of the market’s total return since 1960, making them a key source of income, especially during periods of low interest rates.

However, not all dividend strategies are created equal.

Investors often face a dilemma:

High-Yield Stocks: A focus on immediate income which may limit business growth

Dividend Growth Stocks: A focus on companies consistently increasing payouts over time.

Investors who implement a dividend growth strategy buying stocks like the S&P 500’s Dividend Aristocrats, invest in companies that have raised dividends for at least 25 consecutive years, a balancing act between income and capital appreciation.

This strategy offers lower yields, but often deliver stronger total returns over time.

Below is a chart that compares the performance of $10,000 invested in the S&P 500 Dividend Aristocrats Vs. The Dow Jones U.S. Select Dividend Index, which represents the U.S.’s leading stocks by dividend yield.

The graph tracks over a 20 year period and as you can see, Dividend Growth produced higher returns.

Dividend growth strategies, like the S&P 500 Dividend Aristocrats, have consistently outperformed across varying interest rate environments.

While shifting Federal Reserve policies and market uncertainties have created volatility for many dividend investors, the resilient nature of dividend growth stocks offers you more stability.

Their strong performance, regardless of rate direction, makes them a reliable all-weather investment strategy.

Below is a chart that highlights the average performance of a Dividend Growth Strategy Vs. a High Yield Strategy during periods of rising and falling interest rates.

Dividend Aristocrats (Dividend Growth) takes the cake with a better overall performance.

Dividend yields can be misleading, especially during uncertain times in the stock market.

High-yield companies have a tendency to cut dividends in tough periods, as seen during the Great Financial Crisis. The reason is because they are paying so much of their earnings out in the form of a dividend and when things go south, one of the first things to be reduced or cut is the dividend in order to keep more cash inside the company.

In contrast, the S&P 500 Dividend Aristocrats have consistently grown their dividends through challenging markets, leading to higher yield-on-cost over time, despite starting with lower initial yields.

This highlights the importance of focusing on income growth and sustainability rather than just the yield. Too many investors are looking for the biggest “bang for their buck” and not focusing on what really matters… Growth.

In today’s rollercoaster of rising rates and economic twists, it’s may be smart to rethink your dividend game plan.

While high yields might seem tempting, long-term dividend growth is the real MVP.

See you in the next one!

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
Follow me on Twitter, Instagram and LinkedIn

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