Friday, February 21, 2014

S&P 500 Dividends (1977-2013)

The chart shown below (click on the chart to see a larger image) annual dividend payouts for the S&P 500 Index between 1977 and 2013. As shown, the dividends paid by the S&P 500 Index component companies increased from $4.67 in 1977 to about $34.99 in 2013. This is a total increase of about 649% and an annualized increase of 5.75% in the dividend yield. This an impressive annualized increase considering that this time period includes several sharp bear markets such as those during (a) 1981-82; (b) 1990-91; (c) 2000-02; and (d) 2008-09.  During the last two bear markets, the S&P 500 Index lost more than 50% of its value. 

As shown, the annual dividend payout amounts increased very rapidly during the late 70s-early 80s likely as a result of inflationary pressures (during the 1970s) and strong economic growth (during the 1980s).  The annual % increase in dividends was also strong between 2003 and 2007, fueled both by strong corporate profits and the dividend tax cut that Congress passed in 2003.  Dividend payouts, however, plummeted over 21% in 2008 during the 2008 bear market and financial crisis and only recovered to hit a new all-time high in 2012.  The annual dividend payout of the S&P 500 Index increased by double digits during each of the past three years and was about 53.9% higher in 2013 than it was in 2010. 

I still anticipate further % increases in the dividend rate in the coming years. Investors were burned badly during the 2000-2002 and 2007-08 bear markets and currently appear to prefer dividend increases over share buybacks. However, the % increase may be smaller in future years, given the dividend tax increases that the Obama administration pushed through Congress in 2012. 

Saturday, February 08, 2014

Historical Annual Returns for the S&P 500 Index - Updated Through 2013

2013 was a huge year for across the board for practically all equities with the notable exception of Emerging Markets.  The S&P 500 Index, one of the most widely-followed U.S. equity indexes, had a total return of about 32.39%, its largest calendar year return since 1997 and the 13th largest calendar year return of the 88 calendar year returns shown in the charts below.   The market was largely driven higher as a result of  slight improved economic growth as well as well as the Federal Reserve's continued QE3 U.S. Dollar pumping

Standard & Poor's introduced its first stock market index in 1923 and created the S&P 500 Index in 1957.  The charts below (click on individual charts for a larger view) show annual total returns for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2012.  The annualized return for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2012 was about 10.08%.  The 5-year annualized return through the end of 2013 was about 17.94%, one of the best 5-year annualized returns shown on the charts below.  The 10-year annualized return through 2013 was about 7.40%, the highest 10-year annualized return since 2006.

According to the Wall Street Journal, as of February 7, 2014, the P/E ratio of the S&P 500 Index based on estimated earnings over the next 12 months is approximately 15.10. As I have previously discussed, the average P/E ratio of the S&P 500 Index and other large caps stocks has been around 16 based on data dating back to the 1800s, so the S&P 500 Index may be slightly undervalued relative to its historical average P/E ratio.  As of February 7, 2014 the total return of the S&P 500 Index (including reinvested dividends) is about -2.59% as a result of recent stock market mini-correction.  






Tuesday, January 21, 2014

Historical Returns for the MSCI Emerging Markets Index (1988-2013)

The Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index is the preeminent emerging markets equity index. I have previously discussed annual returns of the index during the 1989-2008, 1989-2009, 1988-2010, 1988-2011, and 1988-2012 time periods.

The chart below (click on the chart for a larger view) shows annual returns for the MSCI EM Index in terms of U.S. Dollars between 1988 and 2013. The returns shown below represent net dividend reinvested returns. The 2013 total return for the MSCI EM Index was -2.60%, lagging considerably behind most other major stock indexes

During the 26 years for which I have data (i.e., 1988-2013), the MSCI EM Index lost value during 11 calendar years and gained value in 15 other calendar years. The worst returns came during 2008 when the Index plummeted 53.33% during the financial crisis and the best annual gains came during 2009 when the Index soared 78.51%. As I have previously discussed, the best extended stretch of strong returns occurred between 2003 and 2007 during which the index gained an impressive 382.96%, an annualized gain of approximately 37.02%.

The annualized returns were 14.79% for the 5-year period, 11.17% for the 10-year period, 10.91% for the 15-year period, and 7.32% for the 20-year period ending in 2013. Annualized returns between 1988 and 2013 were about 11.94% and the Index had a total new return of 1,776% between 1988 and 2013. The performance of the MSCI EM Index between 1988 and 2013 greatly exceeds the 10.50% annualized return and 1,242% total return of the S&P 500 Index during the same time period.

Emerging Markets are typically critical portion of an investment portfolio of any stock market investor with a long-term investment strategy.  Investment advisers typically recommend limiting Emerging Markets to no more than 10-15% of an aggressive investor's portfolio.  Although Emerging Markets have lagged significantly behind other major indexes in recent years, I expect the trend to reverse at some point in the near future.


Monday, January 20, 2014

1980 - 2013 Stock Market Returns for Various Indices

I have posted charts showing annual stock market and bond market returns for various indices in recent years for the time periods from 1980-2006, 1980-2007, 1980-2008, 1980-2009, 1980-2010, 1980-2011, and 1980-2012.  Shown below is an updated chart including returns from 2013 as shown below (click on the image for a larger view).

The chart shown below illustrates total returns for small cap indices (Russell 2000, Russell 2000 Value, and Russell 2000 Growth), large cap indices (S&P 500, S&P/Citi 500 Value, and S&P/Citi 500 Growth), a broad-based foreign stock index (Morgan Stanley Capital International Index for the developed stock markets of Europe, Australasia, and the Far East ("MSCI EAFE index")), an index of bonds (Barclays Capital Aggregate Bond Index)*, and the Nasdaq Composite Index**.

2013 was a fantastic year for stock market indices across the board as central banks around the world continued a strategy of monetary easing to provide additional liquidity to the markets.  Small caps and tech led the way, with the Russell 2000 Growth Index rising 43.30%, the Nasdaq Composite rising 40.12%, the Russell 2000 rising 38.82%, and the Russell 200 Value index rising 34.52% .  Large caps also performed well, with the S&P 500 Index rising 32.39%  The bond market, on the other hand, posted its first annual decrease in value since 1999, dropping 2.02%. 

Value indices outperformed Growth indices during the past year - the Russell 2000 Value Index was the strongest equity performer of the indices shown below for the first time since 2004, returning about 18.05%. The next best performer was the S&P 500 Value Index, which returned about 17.68% in 2012. International equities continued to rebound from the tough environment resulting from the Euro-zone issues in 2011, with the MSCI EAFE Index gaining about 22.78%. 

As shown in the chart below, the Russell 2000 Value Index provided the strongest returns by far between 1980 and 2012, returning a total of 6578%, or an annualized return of about 13.15% per year. The total return of the Russell 2000 Value Index is more than 2,200% more relative to its initial value on December 31, 1979 than the next best index tracked below, the S&P 500 Index.


* The Barclays Capital Aggregate Bond Index was known as the Lehman Brothers Aggregate Bond Index prior to 2008.
** The Nasdaq Composite Index returns include annual price increases in the Index for 1980-2009 and total returns (accounting for reinvested distributions) for 2010-2013.  I have not been able to obtain total returns for the Nasdaq Composite for calendar years prior to 2010.

Saturday, November 02, 2013

Historical Annual Returns for the VIX Short-Term Inverse Daily Futures Index

As I have previously discussed, the VIX Short Term Futures Inverse Daily Index is a volatile index exhibiting a strong upward bias over time.

The VIX Short Term Futures Inverse Daily Index measures the performance of the inverse (determined daily and on a percentage basis) of the VIX Short-Term Futures Index. The VIX Short Term Futures Index utilizes prices of the next two near-term VIX futures contracts to replicate a position that rolls the nearest month VIX futures to the next month on a daily basis in equal fractional amounts. This results in a constant one-month rolling long position in  first and second month VIX futures contracts.  The VIX Short Term Futures Inverse Daily Index is designed such that if the VIX Short Term Futures Index rises 2% during a trading session, the VIX Short Term Futures Inverse Daily Index will drop about 2% (e.g., the inverse sign of the percentage movement of the underlying index).

The VIX Short Term Futures Index has experienced a strong downward bias in price movement since its creation as a result of contango.  "Contango" refers to a situation where a longer term future has a higher price than a short term future.  The VIX Short Term Futures Index replaces one-month futures with two-month futures - this process is commonly referred to as a future roll.  If the two-month future is trading at a higher price than the one-month future, the value of the VIX Short Term Futures Inverse Daily Index may increase as a result of this futures roll. 

The VIX Short Term Futures Inverse Daily Index, on the other hand, has experienced a strong upward bias since its creation because this index moves in the opposite direction of the VIX Short Term Futures Index on a daily basis.  Between December 20, 2005 and November 1, 2013, the VIX Short Term Futures Inverse Daily Index rose from a value of 100,000 to a value of 388,349.62, an increase of about 288.350%, or an annualized increase of about 18.9%.  This return is particularly impressive considering that the worst financial crisis since the Great Depression occurred during this time period.  As a point of reference, the total return of S&P 500 Index was about 65.31 % during the same time period, or an annualized gain of about 6.6%.

I was able to obtain daily closing values for the VIX Short Term Futures Inverse Daily Index dating back to January 11, 2008.  I obtained daily closing values for the VIX Short Term Futures Index dating between December 20, 2005 and January 10, 2008 and used this data to estimate the daily returns for the VIX Short Term Futures Inverse Daily Index dating back to December 20, 2005.  The charts below show a combination of (a) estimated daily closing values for the VIX Short Term Futures Index between December 20, 2005 and January 10, 2008; and (b) the actual daily closing values for the VIX Short Term Futures Index between January 11, 2008 and November 1, 2013.



The chart below shows the annual returns for the VIX Short Term Futures Inverse Daily Index between December 20, 2005 and November 1, 2013.  As discussed above, the returns for 2009-2013 are the actual returns of the VIX Short Term Futures Inverse Daily Index and the returns between 2005 and 2008 are based on my estimates of the VIX Short Term Futures Inverse Daily Index.

As shown below, the returns for the VIX Short Term Futures Inverse Daily Index have been incredibly volatile, ranging between 162.578% in 2012 and -70.960% in 2008.  Although the down years have included big decreases, the big increases during the up years have more than made up for the decreases.


There is a strong positive correlation between the S&P 500 Index and the VIX Short Term Futures Inverse Daily Index.  I personally believe that the long-term trend of the S&P 500 Index is up.  Accordingly, the long-term trend of the super-charged VIX Short Term Futures Inverse Daily Index is also likely to be up.  There are two popular investment vehicles for capturing the gains of the VIX Short Term Futures Inverse Daily Index: (a) the Proshares Short VIX Short-Term Futures ETF (symbol: SVXY); and (b) the VelocityShares Daily Inverse VIX Short-Term ETN (symbol: XIV).

Friday, October 18, 2013

The VIX Short-Term Inverse Daily Futures Index Presents An Interesting Speculative Investment Opportunity to Small Investors

The Chicago Board Options Exchange Market Volatility Index, or "VIX," is a widely-followed measure of the implied volatility of S&P 500 index options. The VIX is frequently referred to as the fear index or the fear gauge and represents a measure of the stock market's expectation of volatility of the S&P 500 Index over the next 30 day period.  The VIX generally has a negative correlation to price returns of the S&P 500 Index. 

The VIX is the second major volatility index created.  The first major volatility index, now referred to as "VXO," was created in 1993 and represents a measure of the implied volatility of S&P 100 index options.  The creators of the VXO index retroactively determined its closing values dating back to January 2, 1986.  VXO was the most widely-followed volatility until the VIX was created in 2003 to track the implied volatility of S&P 500 index options. Closing values for the VIX index were retroactively determined dating back to January 2, 1990.

The VIX is calculated and reported in real-time by the Chicago Board Options Exchange. The VIX represents a weighted blend of prices for a range of options on the S&P 500 index. The VIX is calculated as the square root of the par variance swap rate for a 30 day term initiated on today's date.  The VIX represents the volatility of a variance swap, not a volatility swap. A variance swap may be perfectly statically replicated through vanilla puts and calls whereas a volatility swap requires dynamic hedging. The VIX is the square-root of the risk neutral expectation of the S&P 500 variance over the next 30 calendar days and is quoted as an annualized standard deviation.

The chart below (click on the chart for a larger view) shows closing values for the VIX dating between January 2, 1990 and October 18, 2013.  As shown, during this time period the VIX closed at values ranging from 9.31 (achieved on 12/13/1993) to 80.86 (achieved on 11/20/2008), with an average closing value of 20.25.


Several additional indexes have been derived from the VIX.  Among them are the VIX Short Term Futures Index and the VIX Short Term Futures Inverse Daily Index.  Both of these derivative indexes were created in 2007 and closing values for these indexes were retroactively determined dating back to December 20, 2005.

The VIX Short Term Futures Index utilizes prices of the next two near-term VIX futures contracts to replicate a position that rolls the nearest month VIX futures to the next month on a daily basis in equal fractional amounts. This results in a constant one-month rolling long position in  first and second month VIX futures contracts. 

The VIX Short Term Futures Inverse Daily Index measures the performance of the inverse (determined daily and on a percentage basis) of the VIX Short-Term Futures Index.  Accordingly, if the VIX Short Term Futures Index rises 2% during a trading session, the VIX Short Term Futures Inverse Daily Index is designed to drop 2% (e.g., the inverse sign of the percentage movement of the underlying index).

The VIX Short Term Futures Index has experienced a strong downward bias in price movement since its creation as a result of contango.  "Contango" refers to a situation where a longer term future has a higher price than a short term future.  The VIX Short Term Futures Index replaces one-month futures with two-month futures - this process is commonly referred to as a future roll.  If the two-month future is trading at a higher price than the one-month future, the value of the VIX Short Term Futures Index may decrease as a result of this futures roll.  However, there are occasions during which the price of the two-month future is less expensive than the price of the one-month future such that the futures roll increases the value of the VIX Short Term Futures Index - this situation is known as "backwardation."

If the spot price of the VIX increases,  the VIX Short Term Futures Index will normally also increase unless the VIX Short Term Futures Index is in a state of contango.  Based on my own observations, the VIX Short Term Futures Index is normally around 30-40% as volatile as the VIX index.  Accordingly, if the VIX spot price increases 10% in a day, the VIX Short Term Futures Index will often rise 3-4% unless the VIX Short Term Futures Index is in a state of significant contango.

When the price of the VIX is below its long-term average of 20.25, the VIX Short Term Futures Index is usually in a state of contango.  However, when the price of the VIX is much higher than its long-term average of 20.25, the VIX Short Term Futures Index is usually in a state of backwardation.

The charts below show linear and log views of the daily closing values of the VIX Short Term Futures Index between December 20, 2005 and October 18, 2013.  During this period of time, the VIX Short Term Futures Index plummeted from a value of 100,000 to a value of 1,319.20, a drop of about 98.68%, or an annualized drop of about 42%.





As shown in the charts above, the VIX Short Term Futures Index has been a terrible speculative investment.  Although it has risen sharply during several periods of time, it is clear the strong downward bias of the index quickly wipes out accumulated gains over time.  A heavily traded ETN with the symbol VXX tracks the VIX Short Term Futures Index.

The VIX Short Term Futures Inverse Daily Index, on the other hand, has experienced a strong upward bias since its creation.  Between December 20, 2005 and October 18, 2013, the VIX Short Term Futures Inverse Daily Index rose from a value of 100,000 to a value of 393,853.39, an increase of about 293.85%, or an annualized increase of about 19%.  This return is all the more impressive considering that the worst financial crisis since the Great Depression occurred during this time period.  As a point of reference, the total return of S&P 500 Index was about 63.7% during the same time period, or an annualized gain of about 6.5%.

I was able to obtain daily closing values for the VIX Short Term Futures Inverse Daily Index dating back to January 11, 2008.  I obtained daily closing values for the VIX Short Term Futures Index dating between December 20, 2005 and January 10, 2008 and used this data to estimate the daily returns for the VIX Short Term Futures Inverse Daily Index dating back to December 20, 2005.  The charts below show a combination of (a) estimated daily closing values for the VIX Short Term Futures Index between December 20, 2005 and January 10, 2008; and (b) the actual daily closing values for the VIX Short Term Futures Index between January 11, 2008 and October 18, 2013.



As shown in the charts above, the VIX Short Term Futures Inverse Daily Index has been a fantastic speculative investment.  Although it has fallen sharply during several periods of time, it is clear the strong upward bias of the index quickly overcomes index drops over time. There are two popular investment vehicles for capturing the gains of the VIX Short Term Futures Inverse Daily Index: (a) the Proshares Short VIX Short-Term Futures ETF (symbol: SVXY); and (b) the VelocityShares Daily Inverse VIX Short-Term ETN (symbol: XIV).

Friday, September 20, 2013

Historical Returns for the Nasdaq-100 (1986-2012)

The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial securities listed on the Nasdaq Stock Market based on market capitalization. It is a modified capitalization-weighted index. The weightings of companies in the index are based on their market capitalizations, with rules capping the influence of the largest components. As of September 20, 2013, the three largest components of the index are Apple (comprises about 12.18% of the index), Microsoft (comprises about 7.72% of the index), and Google (comprises about 6.69% of the index).

The Nasdaq-100 was initiated on January 31, 1985 and quickly became one of the most widely-followed technology indexes during the dot.com bubble. The chart below (click on the chart for a larger view) illustrates historical annual returns for the Nasdaq-100 index between the calendar years 1986 and 2012.  The Nasdaq-100 Index does not account for dividend payouts, but the Nasdaq 100 Total Return Index, which was initiated on March 4, 1999, does account for dividends.  The chart below calculated based on returns for (a) the Nasdaq-100 Index from January 1, 1986 - March 3, 1999; and (b) the Nasdaq-100 Total Return Index from March 4, 1999 - December 31, 2012. 

As shown, the Nasdaq-100 soared during the 1990s, rising about 1850% between 1991 and 1999, an annualized gain of about 38.29%. Between 1986 and 1999, the Nasdaq-100 rose about 2704%, an annualized gain of about 26.89%. However, between 2000 and 2008 the Nasdaq-100 was one of the worst-performing U.S. stock indexes, dropping about 66.48%, an annualized loss of about 11.44%.

The Nasdaq-100 rocketed during the late-1990s as investors piled into technology stocks regardless of valuations. As of January 1999, the price/earnings (P/E) ratio of the Nasdaq-100 index was reportedly about 90.2 and topped well over 100 by the end of 1999 as the Nasdaq-100 rose over 102% during the year. After the dot-com bubble burst, the Nasdaq-100 plummeted about 83% between a peak on March 27, 2000 to a trough on October 7, 2002.

Many investors were burned when the dot.com bubble burst and have shunned technology stocks ever since. I personally fell into that camp myself until I reevaluated my position in 2009. Although the technology bear market that extended between March 2000 and October 2002 (or March 2009, the bottom of the financial crisis bear market) was painful, technology stocks now currently have lower valuations than non-technology stocks and are likely to outperform in the near future. For example, as of the market close on September 20, 2013, the Nasdaq-100 had a P/E ratio of about 21.19, which is probably close to 20% of what it was at the time of the Nasdaq-100 index's peak on March 27, 2000.

I have previously stated that I believe that the Nasdaq-100 is in the beginning stages of a multi-year bull market run as investors reconsider the potential of high tech companies.


Friday, September 13, 2013

Historical Returns for the MSCI Emerging Markets Index (1988-2012)

The Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index is the preeminent emerging markets equity index. I have previously discussed annual returns of the index during the 1989-2008, 1989-2009, 1988-2010, and 1988-2011 and time periods.

The chart below lists annual returns for the MSCI EM Index in terms of U.S. Dollars between 1988 and 2012. The returns shown below represent net dividend reinvested returns.*

During the 25 years for which I have data (i.e., 1988-2012), the MSCI EM Index lost value during 10 calendar years and gained value in 15 other calendar years. The worst returns came during 2008 when the Index plummeted 53.33% during the financial crisis and the best annual gains came during 2009 when the Index soared 78.51%. As I have previously discussed, the best extended stretch of strong returns occurred between 2003 and 2007 during which the index gained an impressive 382.96%, an annualized gain of approximately 37.02%.

The annualized returns were -0.91% for the 5-year period, 16.52% for the 10-year period, and 8.96% for the 15-year period ending in 2012. Annualized returns between 1988 and 2012 were about 12.56% and the Index had a total new return of 1,826% between 1988 and 2012. The performance of the MSCI EM Index between 1988 and 2012 greatly exceeds the 9.71% annualized return and 913% total return of the S&P 500 Index during the same time period.

Emerging Markets are typically critical portion of an investment portfolio of any stock market investor with a long-term investment strategy.  Investment advisers typically recommend limiting Emerging Markets to no more than 10-15% of an aggressive investor's portfolio.


* The performance data shown is slightly different than the performance data I saw for the MSCI EM Index at Index Universe, and I am not sure of the reason for the discrepancy.

** I have updated this chart to include returns for 2013 in another post.

Sunday, May 26, 2013

Historical Dividends for General Electric (1962-2012)

General Electric (ticker symbol: GE) is a large multinational conglomerate corporation and is one of the original 12 components of the Dow Jones Industrial Average.  General Electric owns businesses in four different segments: Energy, Technology Infrastructure, Capital Finance, and Consumer & Industrial

General Electric stock is the most widely held stocks in the entire world.  General Electric is also a favorite equity holding among investors seeking dividend income.  As of the market close on May 24, 2013, General Electric's dividend yield was about 3.23%.  General Electric has paid a dividend every quarter for over 100 years.

The charts below (click on a chart for a larger view) illustrate annual dividends for General Electric stock between 1962 and 2012.  As shown, the dividend per share rose from a split-adjusted value of $0.0208/share in 1962 to $0.70/share in 2012.  That is a total gain of 3,260% during that 50-year period of time, or an annualized gain of 7.28%.  This annualized gain greatly exceeds the annualized inflation rate of about 4.12% during the same time period.

This annualized gain is particularly impressive when considering that the dividend payout either stayed the same or increased for every year except for 2009, when the dividend payout was slashed, dropping the payout in 2010 to $0.46/share from a high of $1.24 in 2008.

General Electric is a solid blue chip company which will likely continue to increase its dividends for the foreseeable future.  It took the extreme financial crisis of 2008 to cause General Electric to cut its dividend in 2009, an event which is unlikely to occur again anytime soon.



Friday, March 29, 2013

Historical Returns for the S&P 400 Midcap Index (Updated Through 2012)

The S&P 400 Midcap Index is the most widely-followed U.S. Midcap stock market index.  This index was first introduced in June 1991.  I have previously posted charts with annual returns through 2007, 2008, 2009, 2010, and 2011. The chart below shows calendar-year returns between 1992 and 2012 (click on the chart for a larger view).  The chart below also shows five-year annualized returns, starting with the fifth full calendar year of the existence of the S&P 400 Midcap Index (i.e., 1996),  ten-year annualized returns, and fifteen-year annualized returns.

As illustrated, the S&P 400 Midcap Index rebounded in 2012 from a down year in 2011, rising about 17.88%.  The annualized return of the Index from 1992-2012 was about 11.28%, the 5-year annualized return through 2012 was about 5.15%, the 10-year annualized return through 2012 were about 10.53%, and the 15-year annualized return were about 9.14%. The total return (including reinvested dividends) between December 31, 1991 and December 31, 2012 was about 842.87%.

I am a fan of midcap stocks and recommend that any long-term investor seriously consider investing money in midcap stocks, such as those tracking the S&P 400 Midcap Index (e.g., the Midcap SPDR ETF (symbol: MDY) tracks the S&P 400 Midcap Index). Midcaps tend to provide higher returns over time than large cap stocks, such as those comprising the S&P 500 Index, although such stocks are generally more volatile over shorter time periods.

Saturday, March 02, 2013

Historical Annual Returns for the S&P 500 Index - Updated Through 2012

2012 was a good rebound year for practically all U.S. equity indexes, including the S&P 500 Index, which had a total return of about 16.0%.   The market was driven higher as a result of somewhat improved economic growth as well as currency devaluation caused by the Federal Reserve pumping money into the U.S. economy. 

Standard & Poor's introduced its first stock market index in 1923 and created the S&P 500 Index in 1957.  The charts below (click on individual charts for a larger view) show annual total returns for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2012.  The annualized return for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2012 was about 9.84%.  The 5-year annualized return through the end of 2012 was about 1.66%, one of the worst 5-year annualized returns shown on the charts below, although it is an improvement over the -0.25% 5-year annualized return through 2011.  The 10-year annualized return through 2012 was about 7.10%, a major improvement over the weak 2.92% returns recorded in the 10-year period ending in 2011.

According to the Wall Street Journal, as of March 1, 2013, the P/E ratio of the S&P 500 Index based on estimated earnings over the next 12 months is approximately 13.68. As I have previously discussed, the average P/E ratio of the S&P 500 Index and other large caps stocks has been around 16 based on data dating back to the 1800s, so the S&P 500 Index may have some room to grow again in 2013 if the economy continued to strengthen. As of March 1, 2013 the S&P 500 Index (including reinvested dividends) is up about 6.86% so far this year.









I have posted an updated chart for the returns of the S&P 500 Index during the period between 1926-2013.

Saturday, February 16, 2013

S&P 500 Dividends (1977-2012)

The chart shown below (click on the chart to see a larger image) illustrates dividend information for the S&P 500 Index from 1977-2012. As shown, the dividends paid by the S&P 500 Index component companies increased from $4.67 in 1977 to about $31.25 in 2012. That works out to a total increase of about 569.08% and an annualized increase of 5.581% in the dividend yield. This is a particularly impressive annual increase considering that this time period includes several bear markets such as those during (a) 1981-82; (b) 1990-91; (c) 2000-02; and (d) 2008-09.  The last two bear markets were particularly painful as the S&P 500 Index lost more than 50% of its value during both. 

As shown in the chart below, the annual % increase in dividends increased very rapidly during the late 70s-early 80s as a result of inflationary pressures (during the 1970s) and strong economic growth (during the 1980s).  The annual % increase in dividends was also strong between 2003 and 2007, fueled both by strong corporate profits and the dividend tax cut that Congress passed in 2003.  Dividend payouts, however, plummeted over 21% in 2008 during the 2008 bear market and financial crisis and only recovered to hit a new all-time high last year, in 2012.

I anticipate further % increases in the dividend rate in the coming years. Investors were burned badly during the 2000-2002 and 2007-08 bear markets and currently seem to prefer dividend increases over share buybacks. However, the % increase may be smaller in future years, given the dividend tax increases that the Obama administration pushed through Congress in 2012. 


***An updated version of this chart containing data from 1977-2013 may be found in this post.

Thursday, January 03, 2013

1980 - 2012 Stock Market Returns for Various Indices

I have posted charts showing annual stock market and bond market returns for various indices in recent years for the time periods from 1980-2006, 1980-2007, 1980-2008, 1980-2009, and 1980-2010, and 1980-2011.  Shown below is an updated chart including returns from 2012 as shown below (click on the image for a larger view).

The chart shown below illustrates returns for small cap indices (Russell 2000, Russell 2000 Value, and Russell 2000 Growth), large cap indices (S&P 500, S&P/Citi 500 Value, and S&P/Citi 500 Growth), a broad-based foreign stock index (Morgan Stanley Capital International Index for the developed stock markets of Europe, Australasia, and the Far East ("MSCI EAFE index")), an index of bonds (Barclays Capital Aggregate Bond Index)*, and the Nasdaq Composite Index.

2012 was a good year for most stock market indices as central banks around the world continued a strategy of monetary easing to provide additional liquidity to the markets.  Each of the stock market indices shown in the chart below returned at least 14% in 2012.  The bond market, on the other hand, lagged the stock market indices, returning just over 4%. 

Value indices outperformed Growth indices during the past year - the Russell 2000 Value Index was the strongest equity performer of the indices shown below for the first time since 2004, returning about 18.05%. The next best performer was the S&P 500 Value Index, which returned about 17.68% in 2012.

International equities rebounded from a tough environment as a result of the Euro-zone issues in 2011, with the MSCI EAFE Index gaining about 17.32%.  Other U.S. stock indices were also up across the board, with the S&P 500 Index gaining about 16%, the Russell 2000 Index gaining about 16.35%, and the Nasdaq Composite gaining about 15.91%.

As shown in the chart below, the Russell 2000 Value Index provided the strongest returns by far between 1980 and 2012, returning a total of 4,864.28%, or an average of 12.56% per year. The total returns of the Russell 2000 Value Index has returned nearly 1,700% more relative to its initial value on December 31, 1979 than the next best index tracked below, the S&P 500 Index.

  
* The Barclays Capital Aggregate Bond Index was known as the Lehman Brothers Aggregate Bond Index prior to 2008.

 *** Edit - January 21, 2014 ***
I have updated this chart with results through 2013.

Saturday, November 24, 2012

Historical Dividends for Altria (1979-2012)

Altria (ticker symbol: MO) is one of the most well-known corporations in the world.  Altria owns Phillip Morris USA, which sells Marlboro, the most popular cigarette brand in the world in terms of sales.  Altria controls about 50% of the cigarette market in the United States and sells various cigarette brands such as Parliament, Virginia Slims, and Basic brands in addition to the Marlboro brand.

Altria was formerly known as Phillip Morris Companies, Inc. prior to a re-branding that occurred in 2003.  Altria has engaged in two corporate spin-offs in recent years.  In 2007 Kraft Foods (ticker symbol: KRFT) was spun off from Altria and in 2008 Phillip Morris International (ticker symbol: PM)was spun off. 

Altria is a favorite equity holding among investors seeking dividend income.  As of the market close on November 23, 2012, Altria's dividend yield was about 5.26% and the company has historically maintained one of the largest dividend yields among equities in the Standard & Poor's 500 Index.  According to Altria's website, the company's target dividend payout ratio is approximately 80 percent of adjusted earnings per share.  After accounting for stock splits and the spin-offs of Kraft Foods and Phillip Morris International, Altria has increased its dividend payout per share every year since at least 1970.

The cigarette industry is a mature one that has loyal (or addicted) costumers.  State and local governments have raised taxes on cigarettes on a seemingly annual basis, yet the sales of cigarettes and other tobacco products continue to increase annual given the relatively inelastic demand for such tobacco products.

As a result of the maturity of the market, the relatively inelastic demand, and the large target dividend payout ratio of 80% of adjusted earnings per share, Altria has provided an unbelievable total return to stock holders over the years, making many long-term holders multimillionaires.  Between January 1970 and November 2012, Altria's total return (accounting for reinvestment of dividends and the spin-offs of Kraft Foods and Phillip Morris International) was approximately 216,200%, and annualized gain of about 20% per year!  A $10,000 investment in 1970 in Altria would have grown to approximately $21,620,000 by November 2012, an astonishing return over that time period.

Not surprisingly, the growth in Altria's annual dividend payouts has also been incredibly impressive.  The chart below shows the annual dividends for Altria paid between 1979 and the estimate 2012 full year distribution.*  As shown, after accounting for share splits and the spin offs of Kraft Foods and Phillip Morris International, Altria paid a dividend of approximately $0.0521/share in 1979 and the dividend has increased to an estimate $1.70 in 2012.  The annual dividend has therefore increased 10,421% during this time period.  The annual dividend dividend has increased at an annualized rate of over 15% per year since 1979.

The chart shown below (click on the chart for a larger view) also lists increases in the dividend payout over various 5- and 10-year periods of time.  As shown, the 5-year annualized dividend increase has ranged between a low of about 8.03% (for the period ending in 2007) and a high of about 25.36% (for the period ending in 1990).   The 10-year annualized dividend increase has ranged between a low of about 8.42% (for the period ending in 2007) and a high of about 23.12% (for the period ending in 1989).

Altria has been a staple of investors hungry for large and reliable ever-increasing dividend payouts and should continue to be so for years to come.  There have been fears that fewer people would taking up smoking given the effort to educate young people about the dangers of tobacco use and the always-looming treat of lawsuits.  However, Altria has nevertheless continued to provide strong returns in recent years.  Anyone looking for dividend income should consider Altria as well as Phillip Morris International, which may have a brighter future given the projected steady increase in the number of smokers overseas.



* Without Kraft Foods included in its results, Altria would have paid a dividend of  $2.88 in 2007.
** Without Phillip Morris International included in its results, Altria would have paid a dividend of $1.22 in 2008., 
*** This chart starts with data from the calendar year 1979 because I was unable to locate reliable annual dividend payouts for the years prior to 1979. 

Friday, September 21, 2012

Historical Returns for the MSCI EM Latin America Index (1988-2011)

As I previously discussed last year, Morgan Stanley Capital International, Inc. ("MSCI") created an index to track the performance of Latin American stocks in the late 1980s. The MSCI Emerging Markets (EM) Latin America Index was instituted with a market closing value of 100.00 as of December 31, 1987. It is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets in Latin America. According to the MSCI website, the MSCI EM Latin America Index currently consists of a combination of the following market returns for Brazil, Chile, Colombia, Mexico, and Peru. The Index is dominated by Brazil and the Mexico, the two largest Latin American economies and stock markets.


The chart below (click on the chart for a larger view) shows the annual returns for the MSCI EM Latin America Index between 1988 and 2011 and also indicates 5-, 10-, 15-, and 20- year annualized returns. During 24 full calendar years of its existence, the Index increased in value for 16 years and decreased in value for 8 years. The largest calendar year gains were achieved in 1991 and 2009 when the Index soared 149.66% and 104.19%, respectively. The largest calendar year losses were recorded in 1998 and 2008 when the Index soared 35.11% and 51.28%, respectively.  2011 was a bad year for Emerging Markets equities in general and particularly so for Latin American equities, as the MSCI Latin America Index dropped about 19.15%.

The largest 5-year gain was recorded between 2003 and 2007 when the Index soared 688% for an annualized gain of just over 51% per year during that time period. There were only two 5-year periods during which the Index lost value - those between (a) 1994-1998 when the Index lost 1.74% per annum, and (b) 1998-2002 when the Index lost 7.85% per annum.  During the 5-year period ending in 2011, the Index rose about 6.84% per annum, a respectable return for a period of time that overlaps with the 2008 financial crisis during which the Index dropped over 67% between May 30, 2008 and November 21, 2008.

There are 15 different 10-year periods shown in the chart below and the Index gained value during each of those 10-year periods. The largest 10-year gain occurred between 1988-1997 when the Index gained 1,489%, or 31.87% per annum.

There are 10 different 15-year periods shown in the chart below and the Index gained value during each of those 15-year periods. The largest 15-year gain occurred between 1991-2005 when the Index gained 1,390%, or 19.74% per annum.

There are 5 different 20-year periods shown in the chart below and the Index gained value during each of those 10-year periods. The largest 20-year gain occurred between 1988-2007 when the Index gained 8,229%, or 24.75% per annum.

Unfortunately there is no ETF currently available that tracks the MSCI EM Latin America Index. As I previously stated, the closest proxy that I have been able to locate is the iShares S&P Latin America 40 Index ETF (symbol: ILF), which tracks an index of stocks trading on the exchanges of four Latin American countries - Mexico, Brazil, Argentina, and Chile.

Latin American stocks are historically volatile, but they can provide quite a kick to investment returns during a bull market. Someone holding an ETF tracking Latin American stocks may want to consider consider periodically rebalancing the position to (a) lock in capital gains after years during which those stocks have soared, or (b) increase a position after a year during which the Index dropped in value.


*** I have updated this chart to include returns for 2013 in another post.