Investors are looking for consistent cash flow, mitigation against the risk of loss, and greater predictability and stability. In a word, they want income. The good news: most investors have more tools at their disposal than they realize, and a broader set of strategies can open new paths to their goals.
When Bonds Fell Short, Equities Stepped Up
For much of the decade following the financial crisis and continuing through the COVID era, interest rates remained at or near zero. Bonds retained their place in portfolios, but the income they generated diminished to a level that no longer reliably met the needs of investors seeking income. Cash, meanwhile, offered little practical alternative.
Equity income helped fill that gap. Dividend-paying stocks emerged as one of the more viable solutions for income-oriented investors. While dividends can be reduced or suspended—a risk that should not be overlooked—equities offered investors willing to look beyond traditional bonds something fixed income could not: the potential for a growing income stream supported by the underlying earnings power of companies.
Why Equity Income Still Makes Sense
Even with interest rates higher today, the case for equity income has not weakened. It has evolved.
A common misconception is that lower dividend yields necessarily imply lower income. (dividend yield = dividends paid / stock price x 100). As stock prices have advanced, the S&P 500 dividend yield has declined and now sits near its lowest level since the technology bubble. Yet yield is only a ratio. The actual cash dividends paid by S&P 500 companies have increased meaningfully since 2022, rising by roughly 17%.1 (The S&P 500® Index includes 500 leading US large-cap equity companies and covers approximately 80% of available market capitalization.) Investors are receiving more income even as the headline yield appears lower. In effect, the dividend base has expanded, but it is being measured against higher stock prices.
Dividend growth can also serve as an important indicator of quality. Companies that can consistently raise their dividends often have durable cash flows, pricing power, and management teams with strong visibility into the trajectory of their businesses. In uncertain markets, including those shaped by inflation, tariffs, and economic volatility, these attributes become especially valuable. High-quality dividend growers have historically demonstrated greater resilience during downturns, offering a measure of downside support alongside income.
Dividend-focused stocks are not solely an income allocation. They can also appreciate over time, contributing to total return. This is particularly relevant for investors with long time horizons who need their capital to keep pace with rising costs. Because equity dividend yields and bond yields do not always move in tandem, combining equity income with fixed income can help smooth the overall income experience across different market environments.
Global Infrastructure: Steady Income with Defensive Qualities
For investors looking for income that can hold up in tough conditions, global infrastructure is worth considering. Infrastructure assets — think utilities, toll roads, pipelines — tend to generate stable, long-term cash flows that are often tied to inflation. That combination of income and defensiveness makes infrastructure a useful complement to both dividend stocks and bonds in a well-rounded portfolio.
Is Fixed Income Worth a Fresh Look?
Before 2022, bonds offered relatively little income, and many investors had to move into riskier corners of the market — high yield, private credit, senior loans — just to find meaningful yield. That's changed. Rates have reset higher, and today's bonds offer competitive income within higher-quality portfolios. Investors no longer need to reach for risk to find yield.
Locking in today's yields may also make sense relative to cash. Money market funds have benefited from higher rates, but their yields follow US Federal Reserve (Fed) policy closely. With the Fed having paused rate cuts in 2026 after easing in late 2025, short-term rates could fall if the economic outlook softens. Extending into intermediate-term bonds can help lock in attractive yields for years, rather than rolling over cash at whatever the Fed allows.
Core-Plus: Active Management Earns Its Place
Within fixed income, active core-plus strategies offer more flexibility than passive index funds. Active managers can look beyond Treasuries — into sectors like asset-backed securities, for example — and adjust positioning as conditions change. In a market environment where rates, credit spreads, and global yield curves can shift quickly, that flexibility has real value. Diversifying across global fixed income markets can also reduce reliance on US interest-rate risk alone.
Building an Income Portfolio That Lasts
The right answer isn't choosing between stocks and bonds — it's using both thoughtfully. Fixed income can provide predictable, reliable cash flows. Equity income, especially dividend growers and infrastructure, can provide a growing income stream that helps keep pace with inflation over time. A fixed coupon stays the same; growing dividends can compound alongside the rising cost of living.
As investors live longer, that distinction becomes increasingly important. Balancing income today with income growth over time — while managing risk — is the core challenge of income investing. Investors who approach it with the full toolkit available to them are best positioned to meet it.
Endnotes:
1 Dow Jones Indices. (2026, January 26). S&P Dow Jones Indices reports U.S. common indicated dividend payments increase of $13.1 billion in Q4 2025 and $46.4 billion for 2025. PR Newswire.
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