As October’s momentum leaders fell, dividend funds rallied, and the long-term record favors them too.
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Paul EhrlichmanCEO & CIO, Flextion
Dividend-based equity strategies delivered the best performance during October’s market rotation.
Markets in October shifted from the record-high performance of a narrow basket of momentum-driven stocks to a sharp correction in these leading companies. Nearly 60% of S&P 500 stocks were already in a bear market when this downturn began.
So when concern about the sustainability of the AI spending boom emerged, many of the lagging stocks actually staged a rebound and ended the month with gains. Value, small-cap, defensive and quality funds outperformed. Highlighting the rotational nature of this shift, the equal-weighted S&P 500 beat the cap-weighted index by nearly 600 basis points.
In October, high-dividend stocks led and momentum stocks fell
Price change in October 2026
In October, high-dividend stocks led and momentum stocks fell
Price change in October 2026
In October, high-dividend stocks led and momentum stocks fell
Price change in October 2026
Funds shown: iShares Core High Dividend ETF, Vanguard Value ETF, Invesco S&P 500 Equal Weight ETF, iShares Russell 2000 ETF, SPDR S&P 500 ETF Trust and iShares MSCI USA Momentum Factor ETF. Source: Flextion, from daily closing prices, September 30 to October 30, 2026.
By the numbers
60%
Nearly 60% of S&P 500 stocks were already in a bear market when this downturn began.
600 basis points
Highlighting the rotational nature of this shift, the equal-weighted S&P 500 beat the cap-weighted index by nearly 600 basis points.
Among the year’s best
But one asset class especially stands out as a beneficiary of the evolving investment environment: dividend-focused equity strategies. These funds are posting some of the best results for both October and the year to date. For example, the iShares Core High Dividend ETF gained almost 11% last month and is up 29% so far in 2026.
Strong over the long run
Dividend-based portfolios are well positioned for a changing investment landscape, and the longer-term evidence also points to strong risk-adjusted returns. So these income-boosting funds are attractive now and in the long run.
Dividend growers earned the most
Average annual return of S&P 500 stocks by dividend policy, 1973 to 2025
Dividend growers earned the most
Average annual return of S&P 500 stocks by dividend policy, 1973 to 2025
Dividend growers earned the most
Average annual return of S&P 500 stocks by dividend policy, 1973 to 2025
Past performance does not guarantee future results. Source: Ned Davis Research and Hartford Funds, as of December 31, 2025. Redrawn by Flextion.