Dividend income is often overlooked amid gyrations in the stock market. Consider that in 2024, market bulls were boasting about 24%-plus S&P 500 returns. No one was very focused on the broad market index's 1.2% dividend yield. But dividends are an important element of return, and 2025 for a while was bearing that out. Through May, the S&P 500 was up a thin 1.1%; without dividends, there was essentially no returns at all. Of note, dividend income accounted for 42% of the total return of the S&P 500 between 1930 and 2012, according to Hartford Funds. And that's just the average. In some of those decades, dividends accounted for more than 50% of total returns and even 100%. More recently, dividends have accounted for a smaller portion of returns, at around 15%-20%. But not all dividends are created equal, though, and it is important to understand the difference between the two main investment categories: high-yield stocks and dividend-growth stocks.

In yesterday's essay on our technical process, we noted the importance of market trends over various timeframes. Sector performance provides insight on the broad market, and looking at sector trends over various timeframes also provides insight on the market's past direction and possible future direction.

Lam Research is one of the largest semiconductor wafer fabrication equipment manufacturers in the world. It specializes in deposition and etch, which entail the buildup of layers on a semiconductor and the subsequent selective removal of patterns from each layer. Lam holds the top market share in etch and holds the clear second share in deposition. It is more exposed to memory chipmakers for DRAM and NAND chips. It counts as top customers the largest chipmakers in the world, including TSMC, Samsung, Intel, and Micron.

Lam Research supplies WFE and services that are vital to the production of semiconductors. It offers a range of products used in thin film deposition, plasma etch, photoresist strip, and wafer cleaning processes. Lam has grown its SAM to about 34% of total industry spending on WFE, partly by merging with Novellus Systems in 2012. The customer base includes makers of memory and logic chips, with system shipments representing 60%-65% of revenue and services the remaining 35%-40%.