Why Did Dividend Stocks Fall A Quarter As Much As The Nasdaq?
Part of our series on building a mix that lasts. Start here: is 60/40 dead?
Short answer: what you own decides how a day like this feels. Thursday’s selling was aimed at chip makers and the companies building data centers, and a portfolio of soft-drink makers, drug companies and home-improvement stores owns almost none of that. The bigger question is how much of your money falls like the Nasdaq and how much falls like this. We take that up for whole portfolios in our piece on whether 60/40 is dead, and we’ll come back to it at the end.
“You make money by not losing money.” – Anonymous
What Does Everyone Already Know?
That dividend stocks are supposed to be the calm ones. On Thursday they were:
| Fund or portfolio | Thursday | Lost per $1 the S&P 500 lost |
|---|---|---|
| Income Solution (50 stocks) | −1.5% | 34¢ |
| SCHD | −2.2% | 49¢ |
| SPY (S&P 500) | −4.4% | $1.00 |
| QQQ (Nasdaq-100) | −6.5% | $1.47 |
The Income stocks lost about a third as much as the S&P 500 and about a quarter as much as the Nasdaq-100.
Why the Nasdaq fell hardest is no mystery. It was the AI trade unwinding: the chip makers and the companies building the power and data centers behind AI fell hardest. The worry has been building for weeks. Power is the bottleneck, opposition to new data centers is growing town by town, and the new Congress can lean on both; Meta’s president warned at a Wall Street Journal conference on Wednesday that building new data centers will get harder. We flagged power as the AI trade’s real risk on Nov 2, in our piece on why power, not China, is Nvidia’s real risk.
“Dividend stock” covers a lot of ground, though. Some dividend funds hold banks and tech names that fell with everything else. What’s inside matters more than the label, so let’s look inside.
What Is Inside The Income Picks?
The Trefis Income Solution holds 50 stocks weighted by size, at most 5% each, chosen for 10 straight years of dividends, no cut in the past year and a yield in the top half. Its nine biggest holdings make up about 41% of the portfolio. Here they are, with the numbers that explain Thursday:
| Stock (weight) | Yield | P/E | Thursday |
|---|---|---|---|
| Home Depot (5.0%) | 2.6% | 24.5 | −1.5% |
| Amgen (5.0%) | 2.2% | 26.7 | −3.8% |
| AbbVie (5.0%) | 2.4% | 49.6 | −2.2% |
| Philip Morris (4.8%) | 3.0% | 29.4 | −4.6% |
| Procter & Gamble (4.8%) | 2.6% | 25.2 | −0.1% |
| Coca-Cola (4.8%) | 2.2% | 28.2 | −0.1% |
| ConocoPhillips (4.0%) | 2.5% | 14.2 | −1.1% |
| McDonald’s (3.9%) | 2.6% | 22.6 | −0.8% |
| PepsiCo (3.8%) | 4.1% | 17.9 | +0.2% |
Weights at Oct 31; yield and P/E at the Nov 5 close; Thursday is the day close vs the prior close.
Two things jump out. First, every one of the nine pays at least twice the S&P 500’s dividend yield of about 1%, and PepsiCo pays four times as much. Second, the valuations are ordinary. Most trade between about 18 and 30 times earnings, close to the market’s own multiple of about 23. AbbVie at 50 times is the exception, and that reflects charges on its earnings more than a sky-high price. These aren’t cheap stocks hiding from the market. They’re stocks whose businesses don’t depend on how many chips get bought next year.
It wasn’t a free pass. Philip Morris fell almost 5% and Amgen almost 4%. Further down the list, Zoetis fell 8.0% and Buckle 7.3%, while Inter Parfums jumped 9.5% and Broadridge rose 2.4%. Only about a third of the 50 rose. The calm came from owning 50 different businesses and almost none of the AI chain, not from any one stock being safe.
What Kind Of Businesses Are These?
Here’s the part the yield alone doesn’t tell you. These companies keep a lot of every sales dollar, and most of them keep more today than their five-year average:
| Stock | Op. margin now (5-yr avg) | Free cash flow | 12-month return |
|---|---|---|---|
| McDonald’s | 46% (45%) | $7.8B | −7% |
| Philip Morris | 39% (37%) | $13.6B | +41% |
| AbbVie | 36% (30%) | $18.9B | +37% |
| Amgen | 32% (29%) | $9.6B | +48% |
| Coca-Cola | 32% (30%) | $14.3B | +43% |
| Procter & Gamble | 23% (23%) | $15.3B | +18% |
| ConocoPhillips | 25% (26%) | $11.1B | +59% |
| PepsiCo | 15% (14%) | $10.5B | +4% |
| Home Depot | 12% (14%) | $15.1B | −4% |
Together the nine produced about $116 billion of free cash flow over the past year.
Look at the last column, because it’s the surprise. Over the past twelve months to Nov 5, Amgen, ConocoPhillips, Philip Morris and Coca-Cola each rose more than 40%. Nvidia, the face of the AI trade, fell about 7% over the same twelve months. The rotation into steady businesses didn’t start on Thursday. It’s been running for a year, and it sped up in the past month: Home Depot rose 24% and McDonald’s 19% in the month to Nov 5, while Nvidia fell 24%.
The whole portfolio shows it. In its back-test, the Income Solution rose about 30% in the twelve months to the end of October, while SPY rose about 9% in the twelve months to Nov 5. Since Nvidia’s Oct 6 high, SPY has fallen about 6%. That’s an unusually good stretch for the income stocks, and we wouldn’t count on it lasting. It’s the long record that tells you what to expect.
Is Thursday A Fluke, Or The Pattern?
The pattern, as far as the Income Solution’s back-test goes back. From March 2017 to October 2026, in the months the S&P 500 fell, the Income Solution model lost about 65 cents for every dollar the index lost. In the months it rose, the model made about 76 cents per dollar. In S&P 500 selloffs it lost about 35% less on average, its page shows.
The biggest holdings tell the same story over a longer stretch. Here’s how far each fell, from peak to bottom, in the last three big market falls, against SPY and Nvidia:
| Stock | 2008-09 | 2020 | 2022 |
|---|---|---|---|
| SPY | −55% | −34% | −24% |
| Nvidia | −85% | −38% | −63% |
| McDonald’s | −21% | −37% | −17% |
| Procter & Gamble | −39% | −23% | −24% |
| Coca-Cola | −41% | −37% | −17% |
| PepsiCo | −40% | −29% | −12% |
| Amgen | −32% | −24% | −12% |
| Home Depot | −54% | −38% | −34% |
In 2008 and 2022 most of these fell much less than SPY. In the 2020 crash, many fell about as much.
That last line matters. In a panic like March 2020, when everything is sold at once, a dividend stock can fall a third, and Coca-Cola didn’t get back to its old high until July 2021. The calm shows up most in slower, rate-driven or valuation-driven selloffs like 2022, when the S&P 500 fell 18.2% for the year and the Income Solution model rose 2.9%. Home Depot is the reminder that “dividend” doesn’t mean “defensive”: a business tied to housing fell about as hard as the market, or harder, each time.
And here’s what you give up, honestly. Over the full window the model returned 12.9% a year before fees, against 14.6% for the S&P 500. It trailed the index in 6 of the 10 calendar years; in 2023’s tech-led rally it gained 1.4% while the S&P 500 gained 26.2%. It pays you while you wait, with a dividend yield of about 3.0%, roughly three times the S&P 500’s. The trade is fewer days like Thursday in exchange for fewer days like the best ones.
What Should You Do This Week?
1. Find your own Thursday number. Split your money into what falls like the Nasdaq (growth funds, tech, AI names) and what falls like an income sleeve. A portfolio half in an S&P 500 fund and half in the Income stocks would have lost about 3% on Thursday, against 4.4% all in the index. If your number surprised you, that’s useful to know now.
2. Size the income sleeve for the plan, not the day. Decide how big a drop you can sit through without selling, and let that set how much you hold in the calm part. The move this replaces is switching into dividend stocks the day after a selloff, after a year in which many of them already rose 40% or more. Buying them now because they held up is chasing, just in a cardigan.
3. Rebalance on a schedule. If Thursday pushed your growth share below your target, a calendar rebalance moves some income money back into stocks at lower prices. You don’t need to time it.
The risk: an income sleeve lags in rallies (about 1.7 points a year in the model window), single picks can fall hard (Zoetis on Thursday), a 2020-style panic hits nearly everything, and a year when rates jump can hit dividend payers too. It cushions; it doesn’t insulate.
What’s The Bigger Idea?
We call it Exposure hides in plain sight. Two portfolios can both be “in the stock market” and have completely different Thursdays. One owned the AI build-out through its index fund, its tech fund and maybe a few chip stocks; the other owned soda, soap and drug makers. Neither is wrong. But you should choose which one you own on a quiet day, not discover it on a loud one. Looking out to 2027 and beyond, what matters is whether your mix lets you stay invested through the next year like 2022, and the next year like 2023.
They fell less because they own different businesses. The Income Solution’s 50 stocks fell 1.5% on Thursday while SPY fell 4.4% and QQQ 6.5%. Its nine biggest holdings yield about 2-4%, trade near the market’s multiple and keep 12-46 cents of operating profit per sales dollar. Over 2017–2026 the model lost about 65¢ per $1 of S&P 500 losses and made 76¢ per $1 of gains, earning 12.9% a year vs 14.6% (model, before fees). Size the calm part of your portfolio for the plan you want to keep, then hold it whichever way the next day goes.
What Should You Ask Next?
- Is 60/40 dead? What held up in both 2008 and 2022.
Follow this story with us: we’ll track how the Income stocks do through the rest of this selloff, and through the next rally, and report both.
How Would Your Portfolio Have Felt On Thursday?
What you own decides how a down day feels. If you have $1 million or more invested, get a second opinion from a Trefis expert partner advisor in a free 15-minute call, and ask about Invest With Trefis and its Income Solution.
For questions about this article or underlying research, email help@trefis.com.