Friday, February 21, 2014

S&P 500 Dividends (1977-2013)

The chart shown below (click on the chart to see a larger image)  illustrates 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.

***An updated version of this chart containing data from 1977-2016 may be found in this post.

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 2013.  The annualized return for the S&P 500 Index (and its predecessor S&P 90 Index) between 1926 and 2013 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.

I have posted an updated chart for the returns of the S&P 500 Index during the period between 1926-2015.