In yesterday’s Chart of the Day, we discussed how rotational this month’s declines have been.  Additionally, there is one other factor at play.  In the chart below, we’ve performed a decile analysis of the Russell 1,000 to see how stocks have done this month based on their dividend yields.  The stocks in the deciles to the left of the chart have the lowest or no dividend yields, while the deciles on the right have the highest dividend yields.  The bar for each decile shows the average month-to-date percentage change of the stocks in each decile.  Generally speaking, it has been the highest dividend payers that have held up the best so far this month, while the no or low-yielders have fallen the most.

Dividends don’t impact total return much over short time frames, but they make a massive difference over the long term.  There are plenty of ways to seek dividends including a number of dividend focused ETFs.  However, not all dividend ETFs are created equally.  Below we show three popular ones: the iShares Select Dividend ETF (DVY), the SPDR S&P Dividend ETF (SDY), and the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).  While they may appear similar to one another at face value, each ETF is constructed with different methodology.

For starters, DVY holdings include 100 US stocks that must have at least five years of dividend payments.  Of these three ETFs, that is the shortest dividend time requirement.  For inclusion into SDY, the methodology requires holdings to have consistently increased dividends for at least 20 years, and the NOBL ETF has the most stringent rules with a required 25 year history of raising dividend yields with many holdings having far longer histories.  As shown below, for performance over the past decade, those longer payout histories have (pun intended) paid dividends.   NOBL has posted the best total return over the past decade with a gain of 172% (10.54% annualized). That compares to a 156% return for SDY and a 145% return for DVY.  For comparison to a broader basket of stocks, that annualized return for NOBL even outpaces the broader S&P 500 Value ETF (IVE), but note that it’s still a couple of percentage points worse than the annualized total return of the S&P 500 ETF (SPY).

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Alongside equities, it’s been a rough week for crude oil.  On catalysts of assumed weaker demand and supply news out of the Middle East, front month WTI futures are already down 5.56% month to date with the steepest declines occurring on Tuesday.  As shown below, crude has been falling throughout the past year and these most recent declines have brought the price of black gold to the low end of its range. Whereas last fall it was in the mid-$90 range, this week it moved into the $60 range (today prices are rebounding back above $70). The only other times in the past year that WTI was below $70 was briefly back in December. As we noted in Monday’s Closer, although front month futures are hitting the low end of the past year’s range, those prices are actually at a premium compared to out-month futures as crude markets are currently in backwardation.

Expanding the timeframe out, below we show the price of crude over the past five years.  Again, the most recent prior instance of WTI having a $60 handle was last December, and there have been a handful of other brief periods of price being as low.  Since Q2 2021 as crude prices recovered from the pandemic, the high $60 range roughly has marked a notable level of support .

That decline in crude oil has resulted in lower gas prices.  Seasonally, it is typical for prices at the pump to roll over during the summer months with declines accelerating in the fall. This year, however, prices have been falling since mid-spring.  According to AAA, the national average for a gallon of gasoline yesterday was at $3.31, which is the lowest price since late February.  That is the lowest price of gas on 9/4 since 2021 ($3.19).

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The following charts were included in our daily Closer report on 9/4/24.  You can receive our Closer in your inbox with a two-week trial to Bespoke Institutional.

The table below is our mega-cap “AI” mentions tracker, which counts the number of times “AI” gets mentioned on quarterly earnings conference calls by the six $1+ trillion Tech companies: Apple (AAPL), Amazon.com (AMZN), Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOGL), and NVIDIA (NVDA).

NVDA was the last to report Q2 earnings, and while its highly-anticipated results triggered share price declines, AI mentions ticked up for the first time since Q3 2023 when it mentioned AI a whopping 154 times on its call.  As shown, NVDA mentioned “AI” 115 times on its Q2 call compared to just 93 in Q1.

The 115 AI mentions from NVDA topped its peers in this list again, followed by META, which has really come on strong these last two quarters with a consistent 93 mentions.  GOOGL wasn’t far behind at 90, but MSFT took a step back to 61 after Q1’s 78.  AMZN improved modestly to 43 and AAPL brought up the rear with just 12 mentions despite more buzz around its AI plans and ChatGPT integration after an unusually high 25 the previous quarter.  The total mega-cap AI mentions for Q2 summed to 414, just four off the all-time high from Q3 2023.

Taking another view, the mean (average) and median AI mentions in quarterly conference calls between these six names has really skyrocketed since the release of ChatGPT.  This quarter, median mentions grew to 76 to match the all-time high two quarters ago.  The mean of 69 this quarter was an improvement from last quarter but not enough to meet Q3 2023’s high of 70.  Over the past four quarters, the clearer trend upward in the median vs. a flatter picture in the mean suggests a broader adoption of AI and the discussion of it on earnings conference calls.

Q3 is poised to bring more highly anticipated AI updates from some of the biggest tech names.  We’ll check back in then to see if AAPL can break out from its lackluster numbers compared to competitors, if NVDA can sustain 100+ mentions, and if the middle of the pack can help lift the quarterly total to a new high.

To read the rest of The Closer from 9/4 which also included our analysis on the Fed’s Beige Book, JOLTS, and the latest job opening data from Indeed, sign up for a Bespoke Institutional trial and continue receiving the Closer on a daily basis.