After years of underperformance, the tide may be starting to turn for dividend stocks. And dividend stocks may have artificial intelligence. Raymond James recently stated in his 2026 outlook that the S&P 500 Dividend Aristocrats Index is experiencing the largest underperformance compared to the S&P 500 in decades. Dividend Aristocrats are companies with a track record of increasing their dividends every year for at least 25 consecutive years. These tend to be well-known names like Clorox and PepsiCo. Eagle Asset Management, a subsidiary of Raymond James, tracked the relative performance of the S&P 500 Dividend Aristocrats Index and the broader market benchmark over the past 12 months from 1991 through January 31, 2026. The most recent underperformance started in May 2023. Last month, Dividend Aristocrats’ trailing 12-month return underperformed by 7.3% compared to the 1991 performance gap. In December, it was 10.6%. “The market always experiences natural waves of concentration and expansion of styles that rise and fall in popularity,” said John Ragowski, portfolio manager at Eagle Asset Management. He said it’s not that high-dividend stocks don’t perform well. He noted that since the beginning of 2022, Dividend Aristocrats and the broader segment of the dividend world, “above-median payers,” have returned about 9% annually. He added that because of the Magnificent Seven’s “exceptional” earnings profile, it is simply overshadowed by the S&P 500’s highly concentrated, AI-driven bunch. But the once-wide earnings gap is starting to narrow significantly, Lagowski said. “It is certain that the underperformance itself is starting to stabilize and move closer to neutrality,” he said. “The range of companies that we think are leading the market has widened.” NOBL 1Y Mountain S&P 500 Dividend Aristocrats ETF 1-Year Performance In addition to strong macroeconomic conditions this year and easier comparisons for downtrodden companies, the benefits of artificial intelligence will extend to companies beyond Big Tech, he explained. “If we believe that AI is everything we want, the benefits of this technological advancement need to start spilling over into other industries and companies beyond hyperscalers and construction-adjacent companies,” Lagowski said. “As AI is starting to bring broader benefits to businesses in terms of cost reduction and productivity, we are excited as investors to take advantage of it by investing in companies with strong track records that allow shareholders to participate in the benefits through increased dividends,” he added. Mr. Lagowski focuses on companies that pay above-median dividends. The fund he co-manages, RJ Eagle Virginia ETF (RJVI), held about 17% of its assets in common stocks as of Dec. 31. The fund also owns corporate bonds and preferred securities. “We want to hit the sweet spot in terms of still producing enough solid and meaningful dividend income, but we’re not going to go after the highest dividend payers, because we don’t see growth in these stocks,” he said. He sees opportunities in financial stocks thanks to expected deregulation in the industry. He also believes they will benefit from an accelerating economy. In addition, he is fond of transport and industry.
