Here’s where we are. The four biggest AI spenders just finished reporting, three of them posted negative free cash flow in the same month, and every one of them said next year’s spending will be higher than this year’s. I walked through the whole thing in last week’s article, and my view hasn’t changed: the market is being dramatic about businesses that are growing 20% plus. But dramatic markets can stay dramatic for a long time, and I think 2027 is shaping up to be a year where the indices chop sideways or lower while everyone argues about capex.
I don’t say that to scare anyone out of growth stocks. I own all four of those companies and I’ve been adding. I say it because a year like that is exactly when you want part of your portfolio in funds that pay you to sit through it, and SCHD and DIVO are the two that come up in my inbox more than any other. People treat them as interchangeable. They’re not. One is built to grow your income over a decade and one is built to pay you more of it right now, and in a choppy year the difference between them matters more than it does in a bull market.
Below is why 2027 looks uncertain, what each fund owns and how it makes money, what $100,000 pays today and in ten years, who should own which, and the risks in both.
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Why 2027 Could Be The Year Of Uncertainty
Amazon, Alphabet, Microsoft and Meta are spending close to $740 billion this year on data centers, chips and power, per their own guidance, and the message on every call was that 2027 goes higher. Amazon’s CEO used the words “meaningfully more.” That spending is why three of the four posted negative free cash flow this quarter, and negative free cash flow is why Meta and Alphabet each dropped double digits in October while Microsoft, the one that stayed positive, went up.
We’ve seen a smaller version of this. Between November 2025 and March 2026 the indices went sideways for about four months as money rotated out of technology on the first round of capex fear, and dividend funds outperformed the whole way through. This time the numbers are bigger, the spending is already committed, and the companies are funding part of it with debt, which Alphabet and Amazon both did this quarter. I don’t think it ends the bull market, because the growth underneath is real. I do think it keeps the indices choppy well into 2027, and in a choppy market the funds that pay you while you wait are the ones that win.
SCHD 0.00%↑ and DIVO 0.00%↑ both own businesses that generate cash instead of spending it, which is why they held up while tech fell, and why SCHD is up 38.5% over the past year. But they handle a choppy market in different ways, and the rest of this article is about picking the right one for your situation.
