S&P 500 dividend yields fall below 10Y Treasury note income, fewest stocks outyielding bonds since 2007

The income case for owning stocks just took a serious hit. The S&P 500’s dividend yield has sunk to roughly 1.05%, while the 10-year Treasury yield sits near 4.74%, creating a gap so wide it hasn’t looked this lopsided since before the global financial crisis.

According to data from Ned Davis Research shared by analyst Liz Ann Sonders on August 20, only 3.85% of S&P 500 stocks now out-yield the 10-year Treasury. That’s the lowest ratio since May 2007.

A decade-long reversal

To appreciate how dramatic this shift is, rewind to July 2016. Back then, 63.4% of S&P 500 stocks offered higher yields than the 10-year Treasury. Fast forward ten years, and Treasury yields have normalized after the pandemic-era rate hiking cycle, while the S&P 500’s average dividend yield has been stuck below 2% since 2020. For much of 2026, it has hovered near or below 1.1%.

Why dividends have shrunk

The collapse in equity dividend yields isn’t entirely about companies cutting their payouts. It’s a cocktail of three ingredients, each reinforcing the others.

First, valuations. The S&P 500 has climbed to levels where even steady dividend payments translate into tiny percentage yields. When a stock doubles in price but its annual dividend stays flat, the yield gets cut in half.

Second, buybacks. Corporate America has increasingly preferred share repurchases over dividend increases as its capital return mechanism of choice.

Third, the composition of the index itself has shifted. The S&P 500 is increasingly dominated by mega-cap technology companies that either pay no dividends at all or pay token amounts relative to their market capitalizations.

What this means for portfolio strategy

Fixed-income securities, particularly Treasuries, now present a compelling alternative for investors whose primary goal is income generation. A retiree building a portfolio around cash flow has little reason to take on equity risk for a yield that’s roughly one-fifth of what government bonds offer at 4.74%.

The last time this few S&P 500 stocks outyielded the 10-year Treasury was mid-2007. That doesn’t mean the same outcome is inevitable, but it does suggest that extreme divergences between equity and bond income tend to coincide with late-cycle dynamics.

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