WSJ Your Money Briefing - Why Some Investors Are Flocking to Dividend Stocks

Episode Date: March 21, 2025

When the stock market experiences volatility, some investors turn to a safer play: dividend stocks. WSJ Reporter Hannah Erin Lang joins host Julia Carpenter to discuss the pros, cons and what to know before investing.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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I'm Julia Carpenter for the Wall Street Journal. When the market turns volatile, some savvy investors look for safer alternatives to mitigate risk. One option is dividend stocks. So I would say this is considered a safer, maybe more boring slice of the stock market. Something that in the past couple of years, I think has looked deeply unglamorous, right, when we've seen so much growth in so many different parts of the market. But this is a type of stock that has looked increasingly alluring to investors, given what we've seen in 2025 so far.

We'll talk with WSJ reporter Hannah Erin Lang about the pros and cons to this defensive strategy. Plus what you need to know before following suit. That's after the break. MUSIC Hey, are you in the mood for something new? Why not fly with Air Transat to an eclectic music scene? A vibrant nightlife. And your next big discovery.

Starting this summer, you can fly direct from Toronto to Berlin, exclusively with Air Transat. Now all things Berlin feel closer than ever. Air Transat. Now all things Berlin feel closer than ever. Air Transat. Travel moves us. A lot is rocking the stock market lately. There's the threat of a trade war, fears of a recession, and a new cycle that never slows down. So for many investors, that means it's time to play it safe and cash in where they can. Wall Street Journal reporter Hannah Aaron-Lange joins me to talk about the resurgence of one such defensive move, buying dividend stocks. Hannah, could you first explain what exactly a dividend stock is and how it differentiates

from other investments out there. So in addition to any return on investment that you might see from the stock price going up, you also get this cash payment from the company that typically comes from its profits. So that differs from what we might call growth stocks, which are stocks that investors are buying primarily to watch their investment grow in the form of that stock price going up. And dividend

stocks are still stocks though, all the rules of the stock market still apply. You may still see that price move up and down, but you can also count on that quarterly dividend payment in addition to that. And buying dividend stocks is a strategy. So what are some benefits to this strategy and why is it so popular right now? Dividend paying companies, they tend to be these more mature, well-established companies who are perhaps not so concerned with growing at such a rapid pace because they're not plugging all the profits they earn right back into their growth efforts, for example.

They've been around a while. Many of the largest dividend stocks, the allure is the stability of these firms. So you think like your Coca-Cola, your Procter & Gamble. With a dividend, you're getting some form of return on investment in spite of stock price volatility. So I would say this is considered a safer, maybe more boring slice of the stock market. Something that in the past couple of years, I think has looked deeply unglamorous, right? When we've seen so much growth in so many different parts of the market. But this is a type of stock that has looked increasingly

alluring to investors, given what we've seen in 2025 so far. You mentioned boring and safe. And I can imagine a lot of investors like boring and safe right now. We're seeing a lot of investors pulling out from big companies like Tesla or Nvidia. What are some dividend stocks that you see benefiting from that retraction? What are some dividend stocks that you see benefiting from that retraction? What's happened is as the kind of stars of last year's stock market have done relatively poorly so far this year, these dividend stocks and what we might consider these safer bets have outperformed.

If you look at individual dividend stocks, but also dividend focused ETFs, for example, some of the largest ones have notched small gains, maybe between 2 and 3 percent, but also dividend-focused ETFs, for example. Some of the largest ones have notched small gains, maybe between 2 and 3 percent, but something that's notable in a year when major indexes are in the red. So I think that's indicative of this reevaluation of risk and the fact that many of these dividend-paying companies are also in industries like healthcare, like consumer staples, products that people will continue buying even if there's uncertainty or if the economy slows down. You spoke with one investor who said that with such an uncertain economic picture ahead

of us, quote, you've got to stick to the solid companies that have been around for 100 years, end quote. What are some of those companies and what kinds of dividends do they pay out to their shareholders? Yeah, so I mentioned Coca-Cola, Procter & Gamble, other examples could be Johnson & Johnson, Abbott Labs, which is a company in the healthcare sector. And when it comes to the actual dividends these companies are paying out, these aren't necessarily enormous cash payments if you own, for example, one share. Coca-Cola's most recent annual dividend would have been about $2 a share. Johnson & Johnson might be $5. It's something that really varies depending on the company.

The idea, you know, if you're a dividend-focused investor, for example, is if you own enough shares across enough companies, you can use the dividend payments as a way to supplement your income, for example, in retirement. Others plug that amount right back in so they can buy more shares and potentially earn more dividends. And of course, every investment has its risks, even the supposedly boring and safe ones. So what should people know before buying dividend stocks?

This is still a stock. It's still riskier than something like a bond. It's not necessarily a guaranteed return on investment, so to speak. You could still see that share price fall. So I think that's really important to think about here. And these are companies, though they are large, though they have been around for a long time,

are still susceptible to broader trends in the stock market, broader trends in the economy, and even things going on with that particular company as well. A company can also make changes to the dividends it pays out. They can shrink the amount or maybe even eliminate them altogether. So as people pivot their strategy to these supposedly boring, supposedly safe investments, how do dividend stocks compare to those other investments? They're definitely on the overall risk spectrum Not as as far on the risk of our side as something like a bond

Which is a more or less guaranteed return on your investment It's definitely considered a less risky choice than your tech growth heavy stocks like your Nvidia, your Tesla. The index we've seen move around the most this year has been the NASDAQ because of how tech heavy it is. So if you're all the way on that side of the risk spectrum of investing and you're trying to maybe move a little bit more to the other side, but not as far as to something like gold or something like a bond, then dividend stocks could be a nice way

to stay in the stock market while dialing down that risk level a little bit. That's WSJ reporter Hannah Aaron Lang. And that's it for your money briefing. Tomorrow, we'll have our weekly markets wrap up, What's News in Markets? And then we'll be back on Monday. This episode was produced by Ariana Asperu.

I'm your host, Julia Carpenter. Jessica Fenton and Michael LaValle wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Sinsley are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. Thanks for listening.