Why Some Investors Are Flocking to Dividend Stocks
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Here's your money briefing for Friday, March 21st. 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 Aaron-Lang about the pros and cons to this defensive strategy, plus what you need to know before following suit. That's after the break. ♪

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Join Bank of America in helping Anne's cause. Give if you can at bfa.com slash support Anne. What would you like the power to do? References to charitable organizations is not an endorsement by Bank of America Corporation. Copyright 2025. A lot is rocking the stock market lately. There's the threat of a trade war, fears of a recession, and a news 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 Lang 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 buy.

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 of 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 interest

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's happened is as the kind of stars of last year's stock market have dunked

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%, 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, they're

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 those 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 far on the risk-averse 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. And 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 Asparu. 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. ♪