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.

Tuesday, September 11, 2012

S&P 500 Dividends (1988-2011)

The chart shown below (click on the chart to see a larger image) illustrates dividend information for the S&P 500 Index from 1988-2011. As shown, the dividends paid by the S&P 500 component companies increased from $9.73 in 1988 to $26.43 in 2011. That works out to a total increase of 171.63% and an average annual increase of 4.440% in the dividend yield. This is relatively impressive annual increase considering that this time period includes the terrible bear markets during (a) 2000 to 2002; and (b) 2008, during each of which the S&P 500 lost about 50% of its value.

As shown in the chart below, the annual % increase of dividends increased very rapidly between 2003 and 2007, fueled both by strong corporate profits over the past few years and the dividend tax cut that Congress passed in 2003.  The dividends plummeted over 21% in 2008 during the 2008 bear market and financial crisis and has since nearly recovered to the 2007 high.

I anticipate further % increases in the dividend rate in the coming years. Investors were burned badly during the 2000-2002 and 2008 bear markets and currently seem to prefer dividend increases over share buybacks.

***An updated version of this chart containing data from 1977-2014 may be found in this post.