Gains were uneven across sectors, but this broadening supports stock selection and active management. As shown below in Table 1, the Information Technology and Communication Services sectors delivered the strongest returns, while Consumer Staples were the only sector to post negative returns. Real Estate underperformed the broader market despite the Fed’s decision to cut its benchmark rate.

Table 1

Brentview’s Dividend Growth Strategy continues to focus on companies with durable competitive advantages, strong balance sheets, and consistent free-cash-flow generation. Our approach emphasizes dividend growth as a signal of financial strength and management discipline. These dynamics were reflected in our portfolio results. The Dividend Growth Equity Strategy gained 7.7% (gross) in the third quarter, slightly behind the S&P 500 Index return of 8.1%. Despite a portfolio beta of 0.76, the strategy captured 95% of the benchmark’s return, underscoring stock selection.

Technology was a key driver of absolute returns. Holdings such as Lam Research (+37.8%) and Oracle (+28.9%) delivered outsized gains. However, the portfolio’s underweight in the sector, relative to the benchmark, created a headwind despite strong security selection. In Industrials, Mueller Industries (+27.6%) was a standout, reflecting both strong operational execution and favorable demand trends. However, weakness in Trane Technologies (-3.3%) and Waste Management (-3.1%) offset part of this gain in the sector.

The Materials sector contributed positively, highlighted by CRH (+31.0%), which benefited from infrastructure demand and pricing power. On the other hand, Consumer Staples was the largest detractor. Philip Morris (-10.9%) and Costco (-6.4%) weighed on results, with margin and demand pressures creating headwinds across the sector.

Overall, the quarter highlighted the strength of our stock selection, particularly in Technology, Health Care, and Materials. Through the third quarter, Brentview Dividend Growth returned 17.2% (gross) to date versus the index return of 14.8%.

One size doesn’t fit all markets

When it comes to the dividend landscape overall, 2025 has shown that discernment and positioning are incredibly important. We believe that dividend growth does not occur in a vacuum and reflects a well-run company with strong demand for its product/service. So far this year our actively managed, dividend growth approach has led to some unique opportunities that have outperformed the broader market. However, historically, investors viewed the dividend category as a homogenous class of equities where little mattered between company A and company B. Instead, investors focused on simple rules such as “better than market” dividend yield, and other company-specific attributes were often ignored or downplayed. Along those lines, investment products with simple quantitative rules focused on maintaining an absolute dividend yield or considered companies that met a “length of dividend payment history” criteria crowding the investing landscape. Ultimately, markets are efficient, and a one-size-fits-all rules-based approach may work at times, but not necessarily in all markets. These rules-based approaches to dividend payers have generally struggled in 2025. What changed?

Dividend yield and beta (risk) tend to be the easiest factors to quantitatively screen away potential portfolio holdings from the broader S&P 500 constituent list. Portfolios focused on these attributes also

tend to overly rely on three sectors that have higher than market yield and lower beta, as shown in Table 2. However, these portfolios usually overweight Utilities, Consumer Staples, and Healthcare while also underweighting growing sectors such as Communication Services and Information Technology.

Table 2

Source: S&P Dow Jones Indices  

2025 has shown that each company and sector’s growth outlook has mattered even more. Utilities have performed admirably this year, due to investors recognizing the growth of future electricity demand. According to Morgan Stanley, the capex spending on Artificial Intelligence within the United States is estimated to be $2.9 trillion between 2025-2028¹. The companies pursuing this buildout are

frequently called “hyperscalers” and found in the Communication Services and Information Technology sectors. Given the amount of capex investment from the hyperscalers, the missing link to enable their technology has been the massive power requirements from their data center buildouts. Bloomberg research estimates that by 2050, the estimated investment in expanding nuclear power capacity could reach upwards of $350 billion². For this reason, the utilities sector, specifically companies with existing nuclear fleets, have been rewarded the most. Contrasting the strong future demand found in the utilities sector, a host of issues have plagued the historically reliable consumer staples sector.

The Staples sector has stumbled due to knock-on effects from supply chain inflationary pressures. While each company in this sector has its own unique set of circumstances, commodity costs of ingredients have risen, consumer habits are changing, and competition has increased. Similarly, the historically impervious Health Care sector has also struggled as the sector is facing looming regulatory changes, which have clouding future growth prospects. So, with all this in mind, should an investor avoid these sectors? On the contrary, we would argue that a properly allocated portfolio should have exposure across every sector; however, company specific selection is especially important. Taken further, other attributes, outside of dividend yield matter as well. 

The opportunities field goes beyond chasing yield

As seen below in Table 3, the highlighted cells are the best performing category for both beta (risk) and dividend yield. In the first quarter, defensive positioning (Lower Beta/Higher dividend yield) did well. In the second quarter, offensive positioning (Higher Beta/Lower dividend yield) did well, and the momentum continued into the third quarter. Because of the performance pendulum swing from defense to offense this year, performance has varied widely within the dividend landscape.

Table 3

For example, the S&P 500 Dividend Aristocrats Index focuses on companies that have at least 25 years of consecutive dividend increases. Only sixty-nine companies from the S&P 500 qualify for this designation³. Using this index as a proxy for mature and higher-yielding dividend payers, an investor would be up 5.5% year to date vs. the broader S&P 500’s 14.8%, as shown in Table 4. More importantly, the investor would have lost 1.1% over the last 1 year vs. the broader S&P 500’s appreciation of 17.6%. What was the

culprit for this dramatic underperformance? Given the Dividend Aristocrats’ requirement of increased dividends for the last 25 years, only mature sectors and companies tend to meet that hurdle. In fact, at the end of 3Q, the slower-growing Consumer Staples sector equaled 22% of the index. Due to the concentration, the challenges in the staples sector weighed on the performance results significantly.

Conversely, the fast-growing Information Technology and Communication Services sectors had weightings of 2.9% and 0%, respectively.

For the quarter, economic resilience was demonstrated by the fact that the Industrials and Financials sectors both achieved new highs. Employment Payrolls while slowing have remained consistently positive. Conversely, data such as weak housing starts and lower consumer confidence paint another picture. The weaker soft data however have not been reflected in the hard data yet. Given this backdrop, the Federal Reserve has held interest rates unchanged, concerned with the potentially inflationary impact of tariffs. The Federal Reserve dot plot still forecasts two rate cuts for the year.

S&P 500 earnings are forecast to rise 5% in the second quarter, down from an earlier 9.4% estimate. Revenues are now forecast to rise 4.2% from an earlier 4.7%. Despite a slowing in earnings growth, 75% of companies have beaten earnings estimates in their most recent quarterly report. With the strong equity rally in May and June, stock market valuations appear to be rich. The market is currently trading near 22x on a 12 month forward PE basis, well above the five-year and ten-year averages of 20x and 18.4x respectively.

The market valuation is heavily tilted by the dominant big cap technology sector. To illustrate this point further, as shown in Chart 3, unprofitable companies, led by unprofitable tech companies, outperformed their profitable counterparts.

Table 4

To counteract these shifting sector dynamics, investors could have potentially addressed this incredible underperformance by taking a wider view. For example, a more flexible approach that does not restrict the universe of companies by dividend history length. In addition, by assuring exposure to all sectors, an investor could consider a wider range of companies with varying dividend yields, beta, and dividend growth rates. These subtle changes towards portfolio inclusion were the difference between the two indices.

Dividend Growth Scorecard

As seen in Table 5, on a year-to-date basis, all 11 GICS sectors of our holdings have seen a dividend increase in 2025. For the year, thirty-one of our thirty-seven holdings (84%) announced dividend increases of 9.2% on average. The month of September was particularly strong on the dividend growth front. T-Mobile, a company that initiated their dividend in 2023 announced a dividend increase of 15.9%, which followed a 35% increase in September 2024. Other notable increase announcements during the month included Lam Research 13%, Microsoft 9.6%, and Philip Morris 8.9%. Earlier in the third quarter, McKesson had a robust increase of 15.5%.

Table 5

MARKET OUTLOOK & PORTFOLIO POSTIONING

Looking ahead, we expect markets to remain influenced by a mix of resilient economic growth, persistent inflation uncertainty, and shifting Federal Reserve policy. The volatility in Treasury yields during the third quarter underscores how quickly sentiment can change as investors balance the prospects of slower growth against the risk of prolonged tight monetary policy.

While large-cap technology and a handful of consumer discretionary names have carried market leadership in recent quarters, we believe opportunities are broadening. Our results in areas such as Health Care, Materials, and Industrials highlight how dividend growth companies outside of mega-cap technology can contribute meaningfully to returns. We see this as an important signal that the market’s narrow leadership may gradually give way to a healthier, more diversified environment. At the same time, headwinds remain. Margin pressures in consumer staples and select financials illustrate how higher costs and uneven demand can weigh on certain business models. This environment reinforces the value of our focus on companies with pricing power, resilient cash flows, and a proven commitment to dividend growth.

We remain confident that our dividend growth discipline—emphasizing consistency, balance-sheet strength, and sustainable payout growth—positions the portfolio to navigate volatility effectively while capturing upside as leadership broadens. We believe this approach provides both resilience in uncertain markets and attractive risk-adjusted returns for long-term investors.

Sources: 

1. Morgan Stanley Credit is Key for Data Center Financing | Thoughts on the Market August 19, 2025.
2. Bloomberg AI boom may drive over 60% surge in US nuclear capacity by 2050. August 12, 2025.
3. S&P Dow Jones Indices S&P 500 Dividend Aristocrats Index Overview

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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