The S&P 500 declined 4.3% in the first quarter of 2026, while Brentview's U.S. Dividend Growth strategy delivered a slight positive return of +0.05% (Gross of fees), outperforming the benchmark by more than 400 basis points. The quarter also marked a significant milestone: the strategy's 20th year of operation. Since its inception on March 31, 2006, the strategy has navigated a wide range of market environments and has outperformed the S&P 500 Index, both gross and net of fees.
During the quarter, all seven of the "Magnificent 7" stocks (Microsoft, Alphabet, Apple, Nvidia, Tesla, Amazon, and Meta) posted negative returns, as investors took profits amid growing concerns over a potential bubble in artificial intelligence spending. Sentiment also shifted toward companies perceived as vulnerable to AI-driven disruption, adding further pressure to the broader Information Technology sector. Additionally, the conflict in Iran added further crosscurrents for investors and performance dispersion within the market. The narrow waters of the Straits of Hormuz had market wide impacts.
Our Dividend Growth strategy benefited from favorable sector allocations, driven by our overweight positions in Energy and Utilities and underweights in Information Technology and Consumer Discretionary. Security selection was equally additive, with positive contributions from holdings in Consumer Discretionary, Health Care, and Financials. Portfolio trims from our lower yielders & adds to our higher yielders, made in the late 3rd and early 4th quarter last year, ultimately positioned the portfolio more defensively and appeared to add value as well. Both sub-1% yielders and non-dividend payers were hit harder than their higher-yielding counterparts during the period as shown in Table 1. The Above 3% category proved to be the most resilient, as has been the case in half of the more recent market shocks.
Table 1
S&P 500 Index
Source: FactSet
Navigating Volatility in a changing Landscape
Looking at past shocks in the market, as shown in Table 2, performance has varied by dividend category. While dividend-initiators and lower-yielding faster-growth stocks can be additive on the upside, the higher-yielding lower-beta dividend payers have historically held up well during periods of market shocks. However, stock selection remained important as the 2020 COVID sell-off illustrated, in that case, higher dividend payouts were more at risk of dividend cuts.
Table 2
Source: Factset Research
While the events in the middle east remain fluid, and changing by the day, below are some sectors and attributes that we are watching related to the current war in Iran. It’s important to note that company exposure from the region will range dramatically, and therefore, fundamental analysis and stock selection is ever more important.
Economy & Market Outlook
U.S. economic growth decelerated sharply in Q4 2025, with GDP slowing to 1.4% — well below consensus estimates and a significant step down from 4.4% in Q3 2025. Notably, an estimated 100 basis points of that drag was attributable to the federal government shutdown. Growth rebounded in Q1 2026, with preliminary GDP of approximately 3%, a positive signal for corporate earnings. Consensus estimates project 13.2% earnings growth for Q1 2026 and 12.8% for the full year. However, the labor market has remained in a low-hire, low-fire environment, characterized by elevated volatility and punctuated with periods of significant job losses followed by sharp recoveries. The Federal Reserve held its policy rate steady throughout the quarter, though discussion of a potential rate hike has begun to surface. The Fed's 2% inflation target remains out of reach, and rising oil prices present an additional headwind to any near-term monetary easing.
Despite this backdrop, the market correction compressed the forward S&P 500 P/E multiple to 19.7x as of March 31, 2026, down from a peak of 23x last October. This level sits just below the five-year average of 19.9x, though it remains above the ten-year average of 18.9x as shown in Chart 1. Upward earnings revisions in Q1 2026 were concentrated primarily in the Information Technology and Energy sectors.
Chart 1
Source JP Morgan Asset Management
Dividend Growth Scorecard
The S&P 500 is expected to deliver dividend growth of 6.4% in 2026, supported by strong corporate earnings. The US growth rate is considerably faster than the 2.6% dividend growth rate projected for global dividends. Against this backdrop, Brentview aims to deliver portfolio-level dividend growth of approximately 10% on average.
As seen in Table 2, on a year-to-date basis, eight GICS sectors within our portfolio saw dividend increase in the 1st quarter. Twelve out of thirty-six holdings (33%) announced dividend increases of 10.3% on average. February was particularly strong on the dividend growth front with nine companies announcing increases during the month. Standouts included one of our unique Industrials holdings, Mueller Industries, which announced a 40% dividend increase. Other notable increase announcements included TJX Companies (13%), Trane Technologies (11.7%), and Welltower (10.6%).
Despite the geopolitical backdrop, we are currently finding the most compelling dividend growth opportunities in select companies found in the Information Technology, Energy, and Industrials sectors. Within the S&P 500 index, the strongest dividend growth is expected from the Insurance, Software, and Energy industries. That said, a few of our holdings pay special dividends, while not captured in standard growth calculations, and still provide meaningful additional return to shareholders.
Table 2
Source: Public company filings
PORTFOLIO POSTIONING
During the quarter Brentview increased its Energy exposure ahead of rising geopolitical tensions and the subsequent spike in energy prices. We also initiated a position in a global Health Care company with a promising pharmaceutical pipeline and strategic joint ventures within China's growing biotech sector.
Within Technology, we are evaluating a potential shift in emphasis from software toward hardware, as software companies face increasing uncertainty from AI-driven disruption. Aside from that business risk we are evaluating the potential for “knock-on” effects from a fragile global supply chain. With all of this in mind, portfolio changes are made with an overriding focus on maintaining competitive dividend growth rates and avoiding potential dividend cuts.
This commentary reflects the views of Brentview Investment Management and is subject to change as market and other conditions warrant. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, sector, or index. The commentary should not be seen as a solicitation or offer to buy or sell any securities. The advisor (Brentview Investment Management, LLC), and their employees and clients, may hold or trade the securities mentioned in this commentary. Diversification does not guarantee a profit or eliminate the risk of a loss. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
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