'Don't buy the dividend stocks': Strategist

September 26, 2026 - 03:40

Investors searching for stability in a shaky market often turn to dividend stocks, but one strategist warns that this familiar approach may not deliver the protection they expect. Drew Pettit, chief investment strategist at Roundhill Investments, argues that risk-averse equity investors should rethink where they park their money.

According to Pettit, the appeal of dividend-paying companies and low-beta equities has weakened in the current environment. With risk-free Treasury yields sitting at 5.3%, he believes investors can earn solid returns without taking on stock market exposure at all. That yield, backed by the U.S. government, offers a compelling alternative for anyone prioritizing capital preservation.

Pettit also points to so-called halo stocks as a better defensive option than traditional dividend plays. These are high-quality companies with strong balance sheets, durable earnings, and competitive advantages that tend to hold up when markets get rough. Rather than chasing yield alone, he suggests focusing on businesses that can weather downturns through sheer financial strength.

The takeaway is simple. Dividend stocks are not automatically safe, and low volatility does not guarantee protection. For investors who want defense, Pettit says Treasury yields and quality halo names deserve a closer look before defaulting to the old dividend strategy.