Hello, YieldAlley readers! In this issue:

• Why The S&P 500 Is The Ultimate Closet Dividend Growth Investment

• Growth Stocks Falter as Inflation Persists and Trump's Tariff Plans Worry Investors

• Free $525 Bonus From Chime

• And more!

NEWS

Standout Stories

☎️ Skype is shutting down after 22 years of service, with Microsoft switching users to Teams (Sherwood)

🤖 Meta plans to release standalone Meta AI app in effort to compete with OpenAI’s ChatGPT (CNBC)

🌞 Why the Bond Market Looks Brighter Than It Did in 2022 (Morningstar)

📚 3 Levels of Retirement Readiness: Where Do You Stand? (Retirement Manifesto)

📈 Why International Dividend Stocks Have Pulled Ahead (Morningstar)

MARKET THOUGHTS

Growth Stocks Falter as Inflation Persists and Trump's Tariff Plans Worry Investors

• ECONOMY

  • Consumer confidence deteriorated sharply in February, with The Conference Board's Consumer Confidence Index falling 7 points to 98.3, the steepest monthly drop since August 2021, as the expectations portion dropped below 80 for the first time since June 2024 – a level often indicating recession concerns. Inflation expectations rose from 5.2% to 6%, reflecting persistent price pressures that likely contributed to contracting consumer spending despite personal income rising 0.9% in January. The labor market showed some softening with unemployment claims rising by 22,000 to 242,000 for the week ended February 22, the highest level since October, though the broader economy maintained steady growth with Q4 2024 GDP confirmed at an annualized rate of 2.3% and full-year 2024 GDP growth of 2.8%. Core PCE inflation, the Fed's preferred gauge, rose 0.3% in January, with year-over-year prices increasing 2.6%, down from December's 2.9% but still above the Fed's 2% target, constraining potential rate cuts.

• STOCKS

  • Most U.S. stock indexes declined for the second consecutive week, with the Nasdaq Composite recording its worst weekly drop since early September, falling 676.73 points to 18,847.28 (-2.40% YTD) as technology stocks faced particular pressure and the "Magnificent Seven" tech stocks declined amid ongoing regulatory uncertainty, notably with NVIDIA falling 8.48% on Thursday despite its highly anticipated earnings report. The S&P 500 declined modestly to 5,954.50 (-58.63 points), now up only 1.24% for the year, while smaller-cap indices also struggled with the S&P MidCap 400 falling to 3,095.15 (-6.75 points, -0.83% YTD) and the Russell 2000 dropping to 2,163.05 (-32.30 points, -3.01% YTD). In contrast, the Dow Jones Industrial Average finished 0.95% higher at 43,840.91 (+412.89 points), extending its year-to-date outperformance as value stocks continued to outpace growth stocks amid persistent inflation and concerns about President Trump's reiterated plans to impose new tariffs on several trading partners by March 4.

• FIXED INCOME

  • U.S. Treasury markets strengthened amid disappointing economic data releases, with yields declining across most maturities through Thursday as intermediate-term yields decreased more than short- and longer-term yields, creating a supportive environment for fixed income markets as investors sought safety amid stock market volatility. Municipal bonds posted positive returns but underperformed Treasuries despite strong demand. New municipal issuance was well absorbed and mostly oversubscribed, indicating continued investor appetite for tax-exempt fixed income. The fixed income rally reflected growing concerns about economic growth and uncertainty regarding the inflation outlook, with the core PCE price index still above the Fed's target, suggesting that while bonds were finding support from growth worries, inflation persistence remained a challenge for central bank policy.

INCOME BUILDING

Why The S&P 500 Is The Ultimate Closet Dividend Growth Investment

In 2024, the S&P 500 index reached a significant milestone by distributing a record $74.83 in annual dividends per share—representing a 6.4% increase over 2023. This achievement extends the index's impressive streak to 15 consecutive years of dividend increases, elevating it from Dividend Achiever status (requiring 10+ years of increases) and putting it on track toward the coveted Dividend Aristocrat designation (requiring 25+ years).

The investment world harbors a $74 trillion secret: if you own an S&P 500 index fund, you're already practicing dividend growth investing, whether you realize it or not. With approximately $74 trillion invested globally in passive strategies, dividend growth investing has quietly become the world's most popular investment approach.

The numbers tell a compelling story. S&P 500 dividends have grown from a mere $0.86 per share in 1977 to $74.83 in 2024—an astounding 8,600% increase. This represents a 7.8% compound annual growth rate over 47 years.

Index funds have emerged as stealth dividend growth vehicles. Vanguard Total Stock Market ETF (VTI)’s 2024 distribution reached $3.67 per share, representing a 7.66% year-over-year increase. Over the past decade, VTI has maintained a 7.27% dividend CAGR and outpaced inflation in 13 of the past 15 years.

The power of this approach becomes evident when considering long-term results. An investor who placed $10,000 in VTI back in 1995 would now be receiving approximately $3,674 in annual dividends—an impressive 36.7% yield on their original investment. This exemplifies the often-overlooked potential of "closet" dividend growth investing through broad market indices.

The late Jack Bogle's equity return formula (Dividend Yield + Earnings Growth ± Valuation Changes) illuminates why index investing and dividend growth investing are fundamentally aligned rather than opposing strategies. Both approaches rely on low costs (VOO's mere 0.03% expense ratio), minimal turnover, and harnessing the power of compounding through reinvestment.

A notable development in 2024 has accelerated the S&P 500's dividend growth trajectory: tech giants including Meta, Alphabet, and Salesforce initiated dividends for the first time, collectively injecting $14.2 billion in new payouts during just the first half of 2024.

Looking ahead, projections indicate S&P 500 dividends will increase by approximately 8% in 2025, potentially reaching $80.82 per share. At the current 7.8% CAGR, an investor buying the S&P 500 today could reasonably expect their dividend income to double in approximately 9 years, quadruple in 18 years, and increase eight-fold in 27 years.

The S&P 500 represents the ultimate "closet" dividend growth investment—delivering 15 straight years of dividend increases while maintaining its public image primarily as a "growth" index. When investors purchase VOO, SPY, or any S&P 500 fund, they're acquiring shares in what has proven to be the world's most successful dividend growth machine.

The next time someone dismisses dividend investing or suggests index funds as an alternative approach, remind them that the S&P 500 itself is arguably the world's most successful dividend growth investment—just cleverly disguised as a broad market index.

INCOME BUILDING

Cash Rates

Government Money Market Funds (7-Day Yields)

• SNVXX (Schwab Government Money Fund - Investor Shares): 4.08%

• SPAXX (Fidelity Government Money Market Fund): 4.00%

• TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 4.19%

• VMFXX (Federal Money Market Fund): 4.25%

Brokered CD Rates (6-Month Rate)

• Charles Schwab: 4.35%

• E*Trade: 4.35%

• Fidelity: 4.30%

• Merrill Edge and Merrill Lynch: —

• Vanguard: 4.35%

ETFs (30-Day Yields)

• SGOV (iShares 0-3 Month Treasury Bond ETF): 4.20%

• BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 4.14%

• USFR (WisdomTree Floating Rate Treasury Fund): 4.22%

• TFLO (iShares Treasury Floating Rate Bond ETF): 4.21%

BONUSES AND DEALS

New Chime Account with Free $525 Bonus

Chime has launched its most generous sign-up bonus ever - a whopping $525 through InboxDollars for new account holders. The process is straightforward: open a new Chime account by signing up for InboxDollars and searching Chime by March 31, 2025, set up direct deposit, and receive two consecutive qualifying payroll deposits of more than $200 each (with the first one hitting within 30 days of signup). This offer has been steadily increasing from earlier promotions of $155-$182, making now an ideal time to take advantage.

Key Terms:

• $525 bonus through InboxDollars (highest ever offered)

• Must enroll by March 31, 2025

• Must be a new Chime member

• Requires two consecutive direct deposits over $200 each

• First direct deposit must arrive within 30 days of signup

• No monthly fees

• Soft credit pull only

• No credit card funding options

• Bonus is taxable income

The account itself comes with no monthly fees and only requires a soft credit pull, making it accessible for most applicants. While the same promotion is available through other platforms (like Swagbucks offering $430), the InboxDollars version currently provides the highest payout.

Picture of the Week