As the U.S. stock market performance lags behind last year’s gains, individual investors increasingly focus on dividend-paying stocks in 2024.
Analysts attribute this shift to concerns about a potential recession and trade tensions, which have spurred greater interest in stable cash returns.
Data from the Korea Securities Depository shows that as of Tuesday this year, U.S. retail investors had made net purchases of $258.72 million in Charles Schwab’s U.S. Dividend Equity ETF (SCHD). This amount is nearly on par with their net investments in Nvidia stock, which totaled $292.65 million.
The SCHD ETF, which invests in 100 top dividend-paying U.S. stocks, has become a popular choice for retail investors seeking stability amid growing market volatility.
Investments in SCHD have jumped by more than 70% over the past year, rising from $151.36 million in the first quarter of 2024.
At the same time, enthusiasm for AI-related stocks, including Tesla and the so-called Magnificent Seven, has cooled, as these stocks have failed to perform as strongly as they did last year.
With interest rates declining, even bond investors are shifting their focus to dividend stocks. The drop in bond yields has prompted a capital shift toward dividend stocks as an alternative investment, making them an increasingly attractive option.
However, some analysts suggest that a strategic shift towards cyclical stocks may be more effective than focusing solely on defensive dividend stocks, especially as President Trump’s tariff policies continue to play a key role in U.S. trade negotiations.
U.S. market volatility has been exacerbated by concerns over tariff policies and inflation, prompting retail investors to increase their investments in dividend stocks for stable cash flow. Experts recommend balancing between cyclical and defensive stocks based on market conditions to maximize returns.
Financial advisors stress the importance of adjusting investment strategies based on the pace and scale of potential interest rate cuts and the actual implementation of tariff policies. Regarding dividend stocks, they recommend focusing not only on high dividend yields but also on evaluating dividend growth potential and the financial health of the companies where investors are putting their money.
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