The Fair Value of Dividends

Now that we’ve taken a look at Stocks in general, let’s look at what Dividends have to offer to the equation.

From Whiskey & Gunpowder

Unless things really are different this time, and investors are willing to buy stocks that pay less than half the rate of inflation — and less even than U.S. Treasury bonds (!) then the current bear market might be expected to roll on for a while longer yet.

To push this decade’s dividend-yield back toward the long-run historic average, the annual pay-out from S&P stocks would need to reach a staggering and never before witnessed 19% — and stay there — for the next 18 months.

Short of market-wide “earning surprise,” you can guess what that would mean for stock prices, currently offering a little over 2.1% per year in dividend yield.

In short: If you’re a “long-term investor” you’d better understand what the future holds.
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