The S&P 500 Hasn’t Yielded This Little Since the | Global Market News
Key Points
The S&P 500 (SNPINDEX: ^GSPC) yields simply 1.2% at the time of this writing. According to knowledge by Multpl, that’s the lowest month-to-month studying since November 2000 when the S&P 500 yielded 1.18% — earlier than the sell-off in the Nasdaq Composite (NASDAQINDEX: ^IXIC) accelerated as the dot-com bubble burst. Many prime growth stocks would go on to undergo brutal losses that took years and even over a decade to get better.Where to invest $1,000 proper now? Our analyst workforce simply revealed what they imagine are the 10 best stocks to buy proper now. Learn More »Here’s what the S&P 500’s present low yield says about the state of the U.S. stock market and what you are able to do about it.
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There’s a clear rationalization for the S&P 500’s falling yieldWith 500 holdings, the S&P 500 looks like a great method to invest in a whole lot of prime U.S. corporations without delay. But the index has grow to be much less diversified in recent times.Just 4% of S&P 500 elements make up 48% of the Vanguard S&P 500 ETF (NYSEMKT: VOO), an exchange-traded fund that carefully tracks the index. Since the S&P 500 is weighted by market cap, large corporations can actually transfer the index in a method smaller corporations can’t.Single corporations at the moment are value the equal of whole stock market sectors, or a number of sectors. Nvidia (NASDAQ: NVDA) plus Microsoft (NASDAQ: MSFT) make up more than the mixed worth of the supplies, real estate, utilities, power, and client staples sectors — illustrating the top-heavy nature of the index.The following desk exhibits the 20 largest S&P 500 elements by market cap and their dividend yields as I write on Aug. 18. The “weighted yield” column is the dividend yield multiplied by the share weighting in the Vanguard S&P 500 ETF — which exhibits the impression every stock has on the index’s yield.
Company
Percentage of Vanguard S&P 500 ETF
Dividend Yield
Weighted Yield
Nvidia
8.06%
0.02%
0.002%
Microsoft
7.37%
0.62%
0.046%
Apple
5.76%
0.44%
0.025%
Amazon
4.11%
0%
0%
Alphabet
3.76%
0.4%
0.015%
Meta Platforms
3.12%
0.26%
0.008%
Broadcom
2.57%
0.75%
0.019%
Berkshire Hathaway
1.61%
0%
0%
Tesla
1.61%
0%
0%
JPMorgan Chase
1.48%
1.82%
0.027%
Visa
1.09%
0.69%
0.008%
Eli Lilly
1.08%
0.83%
0.009%
Netflix
0.92%
0%
0%
ExxonMobil
0.89%
3.72%
0.033%
Mastercard
0.85%
0.64%
0.005%
Walmart
0.79%
0.91%
0.007%
Costco Wholesale
0.78%
0.51%
0.004%
Oracle
0.77%
0.89%
0.007%
Johnson & Johnson
0.74%
2.84%
0.021%
Home Depot
0.62%
2.28%
0.014%
Sum
47.98%
N/A
0.25%
Data sources: Vanguard, YCharts. The key takeaway is that 48% of the S&P 500 contributes simply 0.25% of the index’s yield. Meaning that for those who took out the 20 largest stocks, the S&P 500 would yield round 2% — identical to it did a decade in the past.So it is not that corporations have stopped paying dividends, it is simply that low- or no-yield megacap growth stocks like the “Ten Titans” now make up such a massive share of the index that the total S&P 500 yield is decrease.A justified rallyThe S&P 500 and Nasdaq Composite underwent large surges heading into the flip of the millennium that made stock costs go up quicker than dividends. Similar to at this time’s market, many of the prime holdings in these indexes shifted to growth corporations that prioritize reinvesting of their underlying companies fairly than distributing a portion of earnings to shareholders by dividends.The S&P 500’s low yield illustrates the extent to which growth stocks dominate the stock market. But not like the lead-up to the dot-com bust, this rally is far more healthy as a result of it’s being pushed largely by earnings growth and optimistic sentiment fairly than euphoria.Nvidia is a good instance of a company with each a surging stock price and earnings which have compounded several-fold in simply a few years. Investors aren’t betting on what Nvidia may do in the future if every thing goes proper. Rather, they’re betting on sustained momentum for what Nvidia is delivering proper now.
As of Aug. 1, the ahead price-to-earnings (P/E) ratio of the S&P 500 was 22.2 — which is about a 20% premium to its 10-year average. However, the high quality of the S&P 500’s earnings and growth charge is arguably higher at this time than over that 10-year average. So shopping for the S&P 500 nonetheless is smart for those who agree that the high quality is value paying up for. By this metric, the S&P 500 is costly, however it’s not remotely at nosebleed ranges like we noticed during the dot-com bubble.Achieving a more balanced portfolioThe S&P 500 can nonetheless be a great software for building long-term wealth. However, risk-averse traders could also be on the lookout for stocks at inexpensive valuations and better dividend yields.The easiest method to counteract the S&P 500’s premium valuation and low yield is to allocate different parts of your portfolio to help fulfill worth and income aims. That may be accomplished by investing immediately in prime dividend-paying worth stocks or value-focused ETFs.It’s important to know what makes up the S&P 500 and let the index give you the results you want fairly than unintentionally investing an excessive amount of in the index and taking over more publicity to growth stocks than you are comfy with.Should you invest $1,000 in Vanguard S&P 500 ETF proper now?Before you buy stock in Vanguard S&P 500 ETF, contemplate this:
The Motley Fool Stock Advisor analyst workforce simply recognized what they imagine are the 10 best stocks for traders to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut may produce monster returns in the coming years.Consider when Netflix made this listing on December 17, 2004… for those who invested $1,000 at the time of our advice, you’d have $649,657!* Or when Nvidia made this listing on April 15, 2005… for those who invested $1,000 at the time of our advice, you’d have $1,090,993!*Now, it’s value noting Stock Advisor’s complete average return is 1,057% — a market-crushing outperformance in comparison with 185% for the S&P 500. Don’t miss out on the latest prime 10 listing, out there if you be a part of Stock Advisor.See the 10 stocks »*Stock Advisor returns as of August 18, 2025JPMorgan Chase is an promoting companion of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Home Depot, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Tesla, Vanguard S&P 500 ETF, Visa, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following choices: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure coverage.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
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