By Paul R. La Monica
The market rally really is broadening out. If you need more proof, just check out dividend-paying stocks. Exxon Mobil, Walmart, Ford, Coca-Cola, and a host of others are all beating the darlings of tech.
The iShares Select Dividend exchange-traded fund, for example, climbed 6.6% in January. The S&P 500, Nasdaq, and the Roundhill Magnificent Seven ETF -- all heavy weighted in Nvidia, Microsoft, and Apple -- gained 1.4%, 1%, and 0.3%, respectively.
Other top dividend funds, such as the Schwab US Dividend Equity ETF, State Street SPDR S&P Dividend ETF, and WisdomTree U.S. SmallCap Dividend Fund, are market leaders, too.
"January saw everything but large-cap growth do well when it comes to style ETFs," wrote analysts at Bespoke Investment Group on Monday. "Some of the best performers year-to-date have been dividend and value ETFs, even in the small-cap space."
The Bespoke team pointed out that defensive sectors, which tend to hold up in a slower-growing economy, have benefited from the tech selloff of late. The upshot is that dividend ETFs and dividend stocks look "extended' in the near future, but are "still in a solid long-term uptrend."
Dividend stocks stand to keep going up if interest rates don't move considerably higher. The yield on the 10-Year Treasury, now about 4.25%, offers decent income for conservative-oriented investors. But those who want a little more risk -- the chance to benefit from earnings growth as well as steady income -- should think about blue-chip dividend payers, too.
Valuations are compelling as well. The iShares Select Dividend ETF trades for 13 times earnings estimates for this year, compared with a price-to-earnings multiple of 22 for the S&P 500.
"It is reassuring to see the broadening out of the market," Rusty Vanneman, chief investment officer with FNBO Wealth, told Barron's.
Vannemann said artificial intelligence -- and tech more broadly -- will still be "a dominant theme for the market" this year, but investors should add value stocks, particularly small-caps, to their portfolios.
"When it comes to equities, you need to diversify," he said.
Sofi's investment strategy chief, Liz Thomas, agrees. She told Barron's that the broadening will keep rolling this year: "Value can beat growth for the first time in a while."
Thomas favors several sectors known for solid dividends, such as materials, healthcare and consumer staples.
Strength in dividend names, of course, doesn't mean the tech is dead. But investors need to be sure their portfolios include a wider array of stocks, particularly those that can provide income and stability in what will probably remain a volatile market.
And dividend growers should work their way into portfolios, too. They have been really outperforming the broader market, according to Matt Orton, head of advisory solutions and market strategy for Raymond James Investment Management.
ConEd, Sunoco and Williams Companies, for example, have all announced dividend increases this year. Their stocks are up 5.7%, 9.1% and 10.6% respectively.
And even some lower-yielding tech companies are increasing their dividends. Chip equipment companies Lam Research and Applied Materials and Google owner Alphabet are top holdings in the First Trust Rising Dividend Achievers ETF, for example. Those stocks, which are also getting a boost from the AI trade, have all soared this year. Their dividend yields are below 1%, but they are growing.
Those numbers are important to note. High dividend yields aren't the be-all andend all for income investors. You also want to make sure you're buying stocks that have strong enough balance sheets to keep boosting those payouts.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 02, 2026 13:28 ET (18:28 GMT)
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