We recently published a list of the 10 Overlooked Dividend Stocks to Buy Now. In this article, we are going to take a look at where Graco Inc. (NYSE:GGG) stands against other overlooked dividend stocks.
In recent times, dividend investing—also known as equity income—has fallen out of favor. Once a widely followed and dependable strategy, it has gradually been overshadowed. The strong capital gains delivered by growth stocks appear to have shifted investors’ attention away from the more stable and consistent returns that come with dividend-paying stocks.
However, the recent market downturn, combined with the economic impact of Trump’s trade policies, has brought renewed attention and appeal to these types of stocks. The S&P Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has fallen by a little over 2% since the start of 2025, compared with a 6% fall in the broader market.
Dividend stocks have seen mixed results over different economic cycles—performing well in some downturns and falling behind in others. They generally outpaced the broader market during the recessions starting in July 1981, March 2001, and December 2007. However, their performance lagged during the shorter recessions in 1980 and 2020. This was mainly due to dividend cuts from major firms, along with limited exposure to fast-growing tech names. For context, the steepest drop in dividends came during the 2008–09 financial crisis, when S&P dividend payouts declined by 24%, though investors still received 76% of their income.
That said, while the possibility of dividend reductions is a valid concern and a potential drawback of this strategy, it shouldn’t be a reason to overlook dividend stocks altogether. When incorporated thoughtfully, they can still play a valuable role in a well-rounded investment portfolio.
M&G Investments noted that dividends serve as more than just income—they also signal a company’s financial health and management’s confidence. While short-term market returns often hinge on stock valuations, dividends play a much more substantial role in driving equity returns over longer periods, such as 10 or 20 years. The report also mentioned, citing Bloomberg’s data, that dividends play a vital role in long-term returns. Over the last 25 years, nearly half of the total gains from US stocks have come from reinvested dividends and the power of compounding. During this period, the broader market delivered an average annual return of 7.4%, with 55% attributed to rising stock prices and the remaining 45% coming from reinvested dividend income.
