Investors who prioritize portfolio income may want to consider looking beyond their steady dividend payers in the new year. Over the 12-month period through September 2025, buybacks among S & P 500 companies topped $1 trillion, more than 11% above the prior year, according to S & P Dow Jones Indices. In the third quarter alone, companies bought $249 billion of their own shares, up nearly 10% from the year-ago period. With that, investors on the hunt for income may want to consider combining their dividend payers alongside companies that buy back their shares, according to Dan Lefkovitz, strategist for Morningstar Indexes. “The point is that if you isolate companies paying dividends, that leads you to more old economy sectors,” he said. “Whereas if you include buybacks, it gives you a portfolio that’s closer to the market.” To illustrate that effect, the Morningstar U.S. Dividend and Buyback index has posted an annual return of 16.2% going back over the past three years ending Dec.19. That compares to the Morningstar U.S. High Dividend Yield index’s 13.4% return in the same period and the 22.8% return for the Morningstar U.S. Market index. Old vs. new economy names The difference in performance comes down to the types of companies that tend to make steady dividend payments. “There is this old Wall Street saying that dividends are like marriage and buybacks are like dating,” said Lefkovitz. “A dividend payment is a commitment they will see through going forward and the market punishes companies that [cut] them,” he added. Meanwhile, companies tend to snap up their own shares when management thinks they’re undervalued. This has the positive effect of shrinking the pool of outstanding shares. Most recently, tech giants have been taking billions of dollars of their stock off the market: Apple, Nvidia , Alphabet and Meta Platforms alone accounted for $55.2 billion of the total buybacks among S & P 500 companies in the third quarter, S & P Dow Jones Indices found. Meanwhile, financial services companies, industrials, utilities, energy and consumer staples tend to make up the pool of dividend payers, Lefkovitz said. Those sectors generally didn’t catch the same kind of tailwind from 2025’s artificial intelligence-driven rally. U.S. companies are expected to have spent more money on buybacks versus dividends in 2025 for the fifth straight year, the strategist said. The trend is continuing as 2026 gets underway: This week, access management company Okta announced a $1 billion share purchase program , while cloud solutions company Veeva Systems said it would buy back up to $2 billion in shares. Diversification remains a key theme In addition to incorporating companies that make stock buybacks, income-driven investors may want to also think about looking abroad as they search for dividend payers, Lefkovitz said. “It’s not just the underperformance that’s been challenging, but the [dividend] yields of the U.S. market have declined,” the strategist said, noting that the dividend yield in the U.S. market is at about 1.1%, while yields can top 3% in Europe. Compared to the U.S., European markets tend to be more inclined toward value plays and less driven by technology. Dividend yield is only part of the equation when it comes to boosting returns, so investors should be wary of chasing names with the highest yields. Unusually high dividend yields suggest that a stock’s price may be falling, and companies that are under a lot of pressure may be more inclined to cut their dividend payments. “You can definitely increase risk if you’re going for the highest yields in the market,” Lefkovitz said. “Buying stocks with the highest yields out there can get you into trouble.”