The 30-Year Treasury Now Out-Yields Dividend Stocks by 2.2 Points. History Says What Followed the Last Time.

Key Points:

• The 30-year U.S. Treasury yield reached 5.33% on August 18, its highest level in 19 years, surpassing the yield on the Schwab U.S. Dividend Equity ETF (SCHD), which currently yields about 3.1%.
• Historically, when long-term Treasury yields peaked around this level in 2007, bondholders benefited from locked-in high yields and price gains during the subsequent financial crisis, while dividend-paying stocks experienced widespread cuts.
• During the 2007-2009 recession, dividend cuts were severe, with 804 cuts in 2009 alone, including major companies like General Electric, and dividend recovery took several years to return to pre-crisis levels.
• The Schwab U.S. Dividend Equity ETF, launched in late 2011, focuses on companies with strong dividend histories and financial health, potentially avoiding some of the worst dividend cuts seen in past recessions.
• The current yield gap between bonds and dividend stocks is driven by rising bond yields rather than dividend declines, posing valuation challenges for income stocks; investors should monitor the financial health of dividend-paying companies rather than the yield spread alone.