The US Doesn't Do Dividends Anymore, Here's why
Comparing Two markets, Two philosophies
Dear Investor,
Zee here. If you’ve invested in both the US and Singapore markets, you’ve probably noticed the difference in mindset. Buy a US stock and you’re often betting on where the company will be in 10 years. Buy a Singapore stock and you’re often just waiting for the next dividend payout.
This isn’t a coincidence. It comes down to a simple question every company has to answer: what do we do with our spare cash?
The answer looks very different depending on how big your home market is, and that’s the real story behind why Singapore is largely a dividend market and the US is largely a growth market.
Singapore: Smaller Market Size, Limited Room to Grow
Here’s the thing about growing a business: it isn’t limitless. Every company eventually hits a point where it simply doesn’t need more capital to keep operating. Past that point, throwing more money at the business doesn’t widen its competitive edge or win it more customers. It just sits there.
Take Vicom, Singapore’s dominant vehicle inspection operator. It’s essentially a regulated monopoly: every vehicle on Singapore’s roads needs a yearly inspection, and the number of vehicles is capped by government quota. There’s a natural ceiling here.
Building ten more inspection centres wouldn’t create more customers, because the customer pool is fixed by policy. Neither would expanding Vicom to overseas markets be possible. As such, Vicom’s capital needs are steady and predictable, year in and year out.
So what happens to all the extra cash Vicom generates? Since ploughing it back into more inspection centres makes no sense, the next best move is to return it to shareholders, either through buybacks (of shares) or dividends.
This points to a broader investing principle: a company exists to create value for its shareholders, one way or another. When there’s genuinely nowhere useful for extra cash to go, reinvesting it anyway doesn’t build value; it just drags down returns. Sending it back to shareholders through dividends is often the smarter, more disciplined choice.
There’s also a market-psychology angle here. Cash sitting on a balance sheet doesn’t always get full credit from investors, because it comes with question marks: how long will management sit on it, will it eventually be deployed well, or might it get wasted on a bad deal?
A company that just piles up cash without a plan tends to make investors nervous, not confident.
Dividends solve this by removing the guesswork. When a company commits to paying out cash regularly, it forces management to stay disciplined: no hoarding cash for no reason, and no temptation to chase questionable projects just because the money is sitting there.
In a market as small as Singapore’s, with limited runway for expansion, this dividend discipline becomes the default way companies create value.
The US: A Market Focused on Growth
The US tells a very different story, and even dividend investing’s biggest believers are starting to admit it.
There’s an old joke among income investors that alcohol stocks are the perfect dividend play: recession or boom, people drink either way. So when Diageo (the company behind Johnnie Walker and Guinness) cut its dividend earlier this year, it turned heads.
Prominent Dividend Investor Todd Wenning, who wrote a book on dividend investing and once ran a newsletter dedicated to it, pointed out that a Diageo dividend cut would have been unimaginable just five years ago. Coming from him, that’s a notable admission.
Wenning argues the ground has shifted under dividend investing in 4 ways.
#1 The “safe” dividend payers aren’t so safe anymore.
The consumer giants that used to anchor dividend portfolios are under real pressure: from store-brand competitors, influencer-driven marketing, and even weight-loss drugs changing how much people eat and drink.
Long-time Dividend Aristocrats like Coca-Cola, Colgate-Palmolive, J.M. Smucker, and Clorox, companies with 25-plus years of consecutive dividend increases, have all seen their dividend growth slow down.
The problem is that many of these companies already pay out 75% or more of their profits as dividends, leaving little room to redirect cash toward fighting off disruption. And because cutting a dividend would spook investors and get a stock dropped from dividend-focused funds, boards often keep paying out even when reinvesting would serve the business better.
One telltale sign: some companies (Colgate-Palmolive, Sysco, Stanley Black & Decker among them) have raised their dividend by a single cent just to technically keep their streak alive, a signal, in Wenning’s view, that management is quietly worried.
#2 Buybacks have taken over as the preferred tool.
Companies have only been free to buy back their own shares at scale since an SEC rule change in 1982. Given that the average S&P 500 board member today is around 59 years old (meaning they were teenagers when that rule was introduced), most current leadership has never really operated in a dividend-first world.
Buybacks are more flexible than dividends and more tax-efficient for investors holding shares in taxable accounts. If you are investing from outside the US, your dividends are generally subject to a flat 30% withholding tax.
It’s telling that for most of the last decade, the S&P 500’s buyback yield has outpaced its dividend yield.
Our guest writer Aaron found this:
Direct Performance Impact: In 2025, S&P 500 companies bought back roughly $1.0 trillion worth of their own shares. On an overall S&P 500 market capitalization of around $50–$57 trillion, this translates to a Buyback Yield of ~1.8% to 2.0%.
Dilution Offset: Companies issue significant stock for executive compensation and employee stock plans. After accounting for this dilution, net share count reduction for the S&P 500 typically adds only 1.0% to 1.5% to annual EPS growth.
2025 S&P return: 17.9%, share buybacks contribute approximately 6-8% to it.
#3 The index is getting younger, and young companies don’t do dividends.
The average age of a company in the S&P 500 has dropped sharply: from 57 years back in the 1950s to just 15 years today.
Older dividend stalwarts like Campbell’s, Macy’s, Xerox, and Harley-Davidson have exited the index over the past decade, replaced by newer companies built in a completely different era, one where reinvesting for growth, not paying dividends, is the norm.
#4 Analyzing cashflow
Wenning’s takeaway is to stop picking stocks based on their dividend history and instead look at how a company handles all of its cash flow.
Is the buyback program actually shrinking the number of shares outstanding, or just offsetting new shares issued to employees?
Is the balance sheet strong enough to adapt if the business needs to pivot?
And if a company is steadily buying back a few percent of its shares every year, you can effectively create your own “dividend” by selling that same small percentage of your holdings each year.
The Bottom Line
Both approaches make sense once you understand the environment they come from.
Singapore is a small, mature market. Many of its biggest listed companies, like Vicom, operate in spaces with a natural ceiling on growth, often due to regulation or a limited domestic population.
Once a company hits that ceiling, sending cash back to shareholders isn’t a lack of ambition; it’s simply the most rational thing to do with money that has nowhere better to go.
The US is a different animal entirely: a vast, competitive market where companies and entire industries are constantly being challenged, replaced, and reinvented. In that environment, cash is fuel for staying relevant, and companies increasingly prefer buybacks over dividends because they’re more flexible when the future is uncertain.
Neither approach is “better” in isolation; they’re just answers to different questions, shaped by the size and dynamism of the markets these companies operate in.
Understanding this can help you set the right expectations: if you’re investing in Singapore, income is often the reward.
If you’re investing in the US, the reward tends to come from growth, and increasingly, from buybacks rather than dividend cheques.
Disclaimer:
All information here is for educational purposes only. This is not financial advice. Please do your own research and speak with a licensed advisor before making any investment decisions. Past performance is not indicative of future returns. How we invest may not suit your investment goals and risk management profile.