The 30-year U.S. Treasury yield surged to 5.33% on Tuesday, its highest level in 19 years, as concerns over inflation and fiscal policy drove long-term rates higher. The move pushed the yield on the 30-year bond above the dividend yield of the Schwab U.S. Dividend Equity ETF (SCHD), which currently stands at about 3.1%. The gap of roughly 2.2 percentage points marks the first time since 2007 that long-term Treasuries have offered a higher income stream than dividend stocks.
The last comparable episode occurred in June 2007, when the 30-year yield peaked at 5.35%. Investors who locked in that yield at the time received a guaranteed 5.35% annual return for three decades. As the financial crisis unfolded, the yield collapsed to 2.69% by the end of 2008, generating substantial capital gains for bondholders alongside their fixed income.
Dividend-paying stocks, by contrast, faced severe pressure. Standard & Poor’s recorded 110 negative dividend actions in U.S. common stocks in 2007, a figure that ballooned to 606 in 2008 and 804 in 2009. Net dividend payments fell by $43.8 billion in the first quarter of 2009 alone, a record that surpassed even the pandemic-era declines. Major companies, including General Electric, slashed payouts by two-thirds to preserve capital. The recovery in dividends took years, with total increases not surpassing pre-crisis levels until 2012.
The current divergence between bond and equity income reflects broader market dynamics. Long-term yields have risen amid expectations of persistent inflation and elevated government borrowing, while dividend stocks—often concentrated in sectors sensitive to economic cycles—have struggled to match the risk-adjusted appeal of risk-free Treasuries.
