S&P 500 Or Dividend Stocks: What Mix Fits Your Plan For 2027?
Part of our series on building a mix that lasts. Start here: is 60/40 dead?
S&P 500 or dividend stocks? After a day like Thursday, plenty of people are asking it, and it has a real answer, with numbers on both sides. We’ll give you all of them, stock by stock. But here’s what’s less random than any single day: the mix you pick ahead of time decides how a 4% drop feels, and whether you do something you regret about it. We’ll come back to how to pick yours, and how to know it fits a plan for 2027.
“Lose 50% and you need 100% to get back to even. The best way to win is not to lose too much.” – Anonymous
What Happened On Thursday?
The S&P 500 fund (SPY) fell 4.41% to $733.00. The Nasdaq-100 fund (QQQ) fell 6.5%. The dividend funds fell by less: SCHD 2.18% and DGRO 2.77%. The 50 stocks in the Trefis Income Solution, at their October 31 weights, fell 1.5%, about a third of the index’s drop.
It was the AI trade unwinding: the chip makers and the companies building the power and data centers behind AI fell hardest. 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.
That’s why the gap was so wide. Seven companies make up about a third of SPY, by State Street’s count as of Nov 4. On Thursday they supplied about a third of its fall, mostly from two chip makers, Nvidia and Broadcom. The Income Solution owns none of them.
So Which Is Better, The S&P 500 Or Dividend Stocks?
Neither, on its own, and the data shows why. Start with the record. The Income Solution model holds 50 dividend payers with at least 10 straight years of payments, weighted by size with no stock above 5%. Over the last nine and a half years it behaved like this next to the S&P 500:
| Mar 2017 – Oct 2026 | Income | S&P 500 |
|---|---|---|
| Return a year | 12.9% | 14.6% |
| 2022 | +2.9% | −18.2% |
| Lost per $1 the index lost | 65 cents | $1 |
| Yield today | 3.0% | 1.0% |
It gave up 1.7 points a year for a flat 2022, smaller losses in down months and three times the income.
Why do the two behave so differently? Look at what’s inside each. Here are four of the biggest stocks in the S&P 500 fund next to four of the biggest in the Income Solution:
| Stock | Yield | Sales growth, 3 yrs | P/E |
|---|---|---|---|
| Nvidia | 0.6% | +827% | 23 |
| Apple | 0.3% | +25% | 38 |
| Microsoft | 0.7% | +59% | 28 |
| Broadcom | 0.9% | +151% | 37 |
| AbbVie | 2.4% | +20% | 50 |
| Home Depot | 2.6% | +9% | 24 |
| Coca-Cola | 2.2% | +13% | 28 |
| Procter & Gamble | 2.6% | +6% | 25 |
Trefis data, Nov 5 close; Nvidia’s yield is on its $1.00 annual dividend after May’s raise (0.29% on the past year’s payouts). The index’s leaders sell growth; the dividend names sell steadiness. The prices aren’t the difference.
That last line surprises people. Dividend stocks aren’t cheap today: AbbVie trades at about 50 times earnings and Coca-Cola at 28, in the same range as Apple and Microsoft. What you’re choosing between is two kinds of business. Nvidia’s sales are about nine times what they were three years ago. Procter & Gamble’s grew 6% in total. One gives you a shot at the next big leg of the AI build-out, along with days like Thursday. The other gives you a check every quarter and a stock that barely moved on Thursday.
Now the case for the index, and it’s just as real. The Income Solution trailed the S&P 500 in 6 of the last 10 calendar years. The big gaps came in strong rallies. In 2023 it rose 1.4% while the index rose 26.2%. Over 2023, 2024 and 2025 together, that’s roughly +23% against +86%. If you’d owned only dividend stocks from 2023 on, you’d have watched the index run away from you for three straight years. That’s hard to sit through too.
How Low Did Each Go When It Counted?
Here’s the part most comparisons skip, measured on daily closes, dividends included:
| Selloff | S&P 500 | Income | Back to peak |
|---|---|---|---|
| 2020 crash | −33.7% | −30.3% | both Aug 2020 |
| 2022 bear market | −24.5% | −13.6% | S&P Dec 2023, Income Nov 2022 |
In the fast 2020 crash, dividend stocks fell nearly as far. In the slow 2022 grind, they fell about half as far and were back 13 months sooner.
That’s honest and it matters. When everything is sold at once, as in March 2020, dividend stocks are stocks. The dividend fund SCHD fell 33.4% then, almost exactly as much as SPY. The cushion shows up in the longer, slower declines, which are also the ones that test your patience most. And the quote above is the reason it matters: after a 24.5% fall you need about a 32% gain to get back to even; after a 13.6% fall, about 16%.
What Does The Half-And-Half Mix Look Like?
Here’s the bigger number. Put the two together and the trade-off gets much smaller than either side alone. Over April 2017 to October 2026, rebalanced monthly, on month-end values:
| Mix | A year | Worst drop | 2022 |
|---|---|---|---|
| 100% S&P 500 | 14.6% | −23.9% | −18.2% |
| 50 Income / 50 S&P | 13.9% | −18.5% | −8.1% |
| 100% Income | 12.9% | −17.7% | +2.9% |
The 50/50 mix kept all but about three-quarters of a point a year of the index’s return and cut its 2022 loss by more than half.
In dollars: on $1 million, the plain index fund lost about $182,000 in 2022; the 50/50 mix about $81,000. On Thursday the same mix would have lost about $30,000 per million instead of $44,000. Over ten years, giving up three-quarters of a point a year adds up to about 6% less money at the end, if the next ten looked like the last nine and a half, which they may not. That’s the price of the smaller fall. Whether it’s worth paying depends on you, not on the market.
Two honest limits. The window starts in 2017, so it holds one 2020 crash and one 2022, but no 2008. And the Income Solution figures are a model, before fees.
What’s The Part That Will Still Matter In 2027?
Not Thursday. What will matter is whether you were still holding your plan when the next good year came. Here’s how to pick a mix you’ll actually keep:
1. Start from what you need the money to do. If you’re spending from the portfolio in 2027, income and a smaller fall carry more weight: on $1 million, a 3.0% yield is about $30,000 a year without selling a share, against about $10,000 from the index. If you won’t touch the money for ten years, the index’s growth matters more.
2. Pick the worst year you can sit through, in dollars. On your real balance, would you hold through a $182,000 loss per million, or an $81,000 one? Be honest. The best mix on paper is the one you won’t sell at the bottom.
3. Also pick the rally you can sit through. This is the part most people skip. If watching the index rise 26% while you rose 1.4% would make you abandon dividends at the top, a 100% dividend portfolio isn’t for you either.
4. Write down a rebalance band. For a 50/50 mix, say 5 points: when one side drifts to 55%, trade back to 50. That takes roughly an 18% gap between the two halves, so most weeks you do nothing.
What this replaces: switching from the index to dividend stocks after a bad day, or back again after a strong year. Both chase the last move. The risk: any mix with dividend stocks will trail a plain index fund in a straight-up market, and a crash like 2020 hits dividend stocks nearly as hard as the index.
What’s The Bigger Idea?
We call it choose the mix before the swing. A mix chosen on a calm day decides how a 4% drop feels before it happens. A mix chosen on a 4% day is usually a reaction to that day. If you want to see how a dividend slice fits next to bonds, gold and cash too, we take that up in our piece on whether 60/40 is dead.
Choose the mix, not the winner. Since 2017 the S&P 500 earned 14.6% a year; dividend stocks 12.9% with three times the yield (model, before fees); a 50/50 mix 13.9%, and it lost 8.1% in 2022, not 18.2% (model). The index’s leaders grew sales far faster; the dividend names fell about half as far in 2022 but nearly as far in the 2020 crash. Pick the worst year and the strongest rally you can both sit through, write down a band, and let the plan carry you to 2027.
What Should You Ask Next?
- Is 60/40 dead? What held up in both 2008-style and 2022-style years.
- Who should you call when the market drops 5%? The conversation to have before the next one.
Follow this story with us: we’ll keep tracking how the index and the dividend sleeve do through year end and into 2027.
Which Mix Fits Your Plan For 2027?
The right split depends on your spending, your taxes and the falls you can live with. If you have $1 million or more invested, get a second opinion on your mix from a Trefis expert partner advisor in a free 15-minute call, or let Invest With Trefis run the dividend side for you with the Trefis Income Solution.
For questions about this article or underlying research, email help@trefis.com.