The Standard & Poor's 500 collectively no longer yields more than government bonds, calling into question whether the rush to high dividend-payers this year can continue.
One of the main selling points for the market had been that there was no better place to go for a steady income stream.
Sub-2 percent benchmark Treasury yields offered little alternative to an S&P 500 that had been yielding until recently a shade higher than bonds.
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That dynamic has changed, though, as the surging market has meant lower collective dividends, in turn posing a challenge to investor habits.
The S&P 500 dividend yield was 1.93 percent Friday, while the 10-year Treasury yield stood at 2.09 percent.
"Dividend stocks in the last few days have been taking a beating, which has been expected. We've been waiting for this," said Howard Silverblatt, senior index analyst at S&P Capital IQ. "But dividend stocks are up for the long term."
Indeed, S&P 500 companies paid a record $37.5 billion in dividends during May.
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That kept up the pace of a record-setting year in which $124.7 billion dividends have been paid out, compared with $112.6 billion in 2012.
Yet dividend stocks have been on the receiving end of bad press lately.
The highest yielders are trading at near-record premiums to their lower-yielding counterparts, according to a warning from Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch.
She warned investors against chasing dividends in the current environment of high payouts and said a "low-beta bubble" looms.
"Investors should care more about the underlying earnings risk, as well as balance sheet quality, sustainability of dividends, and a host of other factors that play into the safety of an investment," she said in a note to clients.
"Today, an opportunity to buy high-quality stocks and sectors as exhibited by lower fundamental betas at lower valuations is still apparent, and we believe this underscores a fundamental mispricing of risk among equities," Subramanian added.
Indeed, investor appetite for dividend stocks has been huge.
The Vanguard Dividend Appreciation exchange-traded fund has pulled in $2.17 billion in 2013, the ninth-most among ETFs, according to IndexUniverse. The fund is off 0.4 percent this week but up 15 percent this year.
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