Image Source: Pixabay

Whether it’s the beginning of the school year or the drop in temperatures, September is often seen as a month of change. This year, there’s an additional factor reinforcing this idea: on Sept. 17, 2025, the U.S. Federal Reserve reduced the Fed Funds rate to 4.00%-4.25%, representing the first change in monetary policy since late 2024. With this rate cut and the market pricing further cuts before the end of the year, high-dividend-yielding strategies like the S&P 500^® High Dividend Index may garner increased interest among market participants.

Alongside the supportive monetary policy, the S&P 500 High Dividend Index currently exhibits both a significant valuation and a dividend yield advantage compared to the S&P 500. This blog will explore these factors, delve into long-term performance—especially during historical drawdown events—and examine the current sector weights in relation to The 500™.

Performance Comparison

Exhibit 1 presents back-tested historical performance dating back to January 1991. Across the period studied, the S&P 500 High Dividend Index outperformed The 500 by 13 bps, with returns of 11.24% compared to 11.11%, albeit with higher volatility. Notably, despite this increased volatility, the S&P 500 High Dividend Index had capture ratios below 100.

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Exhibit 2 shows the performance of the S&P 500 High Dividend Index during 10 historical drawdowns since 1998. Although it underperformed during the Global Financial Crisis and the onset of the COVID-19 pandemic, the S&P 500 High Dividend Index outperformed The 500 in the other eight significant drawdown events over the full period. Across the 10 drawdowns, the S&P 500 High Dividend Index recorded an average return of -12.1%, while The 500 averaged -19.8%, meaning the former had an average outperformance of 7.7%.

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Dividend Yield Comparison

Exhibit 3 illustrates the current last 12 month (LTM) dividend yields for both the S&P 500 High Dividend Index and The 500. As of Sept. 30, 2025, the S&P 500 High Dividend Index offered a yield of 4.52%, while The 500 yielded 1.17%, showing a notable difference of 3.34%.

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Valuation Comparison

Exhibit 4 illustrates the composite valuation discount by employing a straightforward average of the price-to-book, price-to-sales and price-to-earnings ratios of the S&P 500 High Dividend Index in comparison to The 500. As of Sept. 30, 2025, the S&P 500 High Dividend Index was trading at a 52% discount, reflecting discounts of 65%, 58% and 32% on a price-to-book (P/B), price-to-sales (P/S) and price-to-earnings (P/E) basis, respectively. The 52% composite discount placed it in the 97^th percentile of relative cheapness since 2007.

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Sector Comparison

Exhibit 5 displays the current sector weights for The 500 and the S&P 500 High Dividend Index. The S&P 500 High Dividend Index demonstrates a notable underweight of 33.5% in the Information Technology sector. This underweight is counterbalanced by substantial overweights in the Real Estate, Consumer Staples and Utilities sectors, which have overweights of 20.4%, 11.6% and 10.7%, respectively.

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Conclusion

The S&P 500 High Dividend Index may be of particular interest amid the easing monetary policy backdrop due to its historically favorable valuation and dividend yield relative to the S&P 500. The index’s relative valuations and high dividend yield are notable characteristics, particularly in the context of ongoing concerns about elevated valuations, low yields and concentration in broader benchmarks.

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