The Dividend Bull Market

Here’s a look at the S&P 500 (blue line, left scale) along with its trailing dividends (black line, right scale). The two lines are scaled at a ratio of 50-to-1. That means that whenever the lines cross, the market’s dividend yield is exactly 2%.

What’s striking is that dividends have risen right along with prices. Or perhaps, vice versa. I would hardly say that the market’s dividend yield is the end-all in valuations, but the persistence of 2% is noteworthy.

Only recently has it broken down. Through June, the S&P 500 had paid out $41.74 in dividends for the previous four quarters. (That’s the index-adjusted number.) Companies are still churning out the dividend increases. Viewed from this perspective, the market is hardly a bubble. What I like about dividend analysis is how stable dividends are.

I estimate that the trailing four-quarter dividend number will be $42.65 at the end of this month. To be yielding 2%, the S&P 500 would then need to be at 2,132.50 which would be a new closing high.

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Posted by on September 16th, 2015 at 9:32 am


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