The Morningstar Dividend Leaders Index has climbed 6.5% so far this year, compared with the 3% gain on the Morningstar US Market Index, Bella Albrecht, a data journalist at the firm, reported in a blog post on Friday.
The Dividend Leaders Index — which comprises the 100 highest-yielding stocks with a consistent history of paying their dividends and a demonstrated ability to sustain these payouts — rose by 9% in the first quarter, while the overall market fell by 4.6%. The index has given back 2.3% so far this quarter, while the market has risen by 8%.
In the meantime, the Morningstar Dividend Composite Index, a broad measure of dividend stock performance, is up 4.1% year to date, while the Morningstar US High Dividend Yield Index, whose focus is on the higher-yielding half the U.S. dividend-paying market, is up 4%.
Albrecht noted that in 2024, all three dividend-focused indexes trailed the market.
Dan Lefkovitz, a strategist for Morningstar Indexes, identified two forces that are driving the outperformance. One is a shift in sector return trends, which applies to dividend strategies across the board.
“In contrast to the past couple years, the technology sector is not leading, and several members of the Magnificent Seven have stumbled,” Lefkovitz said. “Meanwhile, more defensive, dividend-rich areas of the market have done well.”
The other force driving the Dividend Leaders Index’s outperformance over other dividend indexes is its structure. Lefkovitz said it is a concentrated index of high-yielding stocks that are heavily weighted toward top constituents, some of which have made big gains this year.
The technology sector accounts for 30.9% of the US Market Index, while the weight of the next largest sector, financial services, is 13.9%, according to Albrecht. By comparison, tech represents 17.2% of the Dividend Composite Index and just 4.6% of the Dividend Leaders Index.
Tech has recorded the third-worst sector performance this year, up just 2.6%.
Meanwhile, the utilities sector, which makes up 6.1% of the Dividend Composite Index, 13.1% of the Dividend Leaders Index and just 2.4% of the US Market Index, is the top performer so far in 2025, up 10.7%. Consumer defensive and financial services, which are also heavily weighted in the dividend indexes, have both posted gains near 5% so far this year.
Morningstar analysts drilled down into individual names, finding that Apple has been the biggest drag on the stock market this year. It accounts for 6% of the US Market Index, and has detracted 1.4 percentage points from its return.
In contrast, Apple holds just a 2.5% weight in the Dividend Composite Index, where it has detracted 0.6 points. The Dividend Leaders Index does not hold Apple at all.
Albrecht noted that of the six largest detractors in the US Market Index, only Apple and UnitedHealth are in the Dividend Composite Index, while none are in the Dividend Leaders Index.
See the gallery for the 10 leading contributors to the Morningstar Dividend Leaders Index, with data as of June 16.
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