Below we provide charts of the historical dividend yield of the S&P 500. The S&P 500 is currently yielding the most it has since June 1995 at 2.49%. After declining for about 20 years from the early 80s to the late 90s, the dividend yield has been on a steady rise this decade.
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Some of those S&P 500 dividends are not safe. GM, for example, is dropping their $ .25 dividend. This apparent high yield is transitory.
Posted by: Fredex | July 15, 2008 at 04:02 PM
And the 1-year trailing P/E has been steadily declining during the decade. Risk and expected returns are gradually getting back in line following the 1990s equity bubble. The commodities, real estate and global equities bubbles have prolonged this process by creating transitory wealth. But with a trailing P/E of 20 on the S&P 500 and a dividend yield of less than 2.5%, we still have a way to go before the expected return on stocks fully reflects all the risk out there. During previous bear markets the market P/E would fall to 8-12. So this "bear" has not fully re-set expected returns to exciting levels yet.
Posted by: Rob Weigand | July 16, 2008 at 07:26 PM