S&P 500 Dividends (1977-2016)

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 2016. As shown, the dividends paid by the S&P 500 Index component companies increased from $4.67 in 1977 to about $45.70 in 2016. This is a total increase of about 879% and an annualized increase of 6.02% in the annual dividend payout. This an impressive annualized 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 bad, as the SP 500 Index lost more than 50% of its value during each. 

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.  The annual dividend payout of the S&P 500 Index has increased substantially since the end of the Financial Crisis and was about 103.93% higher during 2016 than it was during 2009. 

There will likely be further % increases in the dividend rate in the coming years. Given that investors were burned badly during the 2000-2002 and 2007-08 bear markets , and generally prefer dividend increases over share buybacks.  The Federal Reserve recently announced that all major U.S. banks passed requisite financial stress tests and approved plans to allow those banks to use capital to  allocate extra capital for stock buybacks, dividends and other purposes.  Accordingly, there is a strong likelihood that financial components of the S&P 500 Index will substantially increase dividends in the near future.

Historical Total Returns for the Nasdaq-100 (1986-2016)

The Nasdaq-100 Index is one of the most widely-followed U.S. stock market indexes.  The Nasdaq-100 includes 100 of the largest domestic and international non-financial securities listed on the Nasdaq Stock Market based on market capitalization and is largely comprised of technology and biotech equities. The weightings of companies in the index are based on their respective market capitalizations, with rules capping the influence of the largest components. As of June 29, 2017, the four largest components of the index are Apple (comprising about 11.61% of the index), Microsoft (comprising about 8.23% of the index), Amazon (comprising about 7.15% of the index), and Facebook (comprising about 5.52% of the index).  Google would have been the second largest component (comprising about 9.15% of the index) if it had not been split into two different equities, Goog and Googl, a split which occurred in 2014.

The Nasdaq-100 was initiated on January 31, 1985 and 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 2016.  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, 2016. 

As shown below, the Nasdaq-100 recorded its second consecutive relatively mediocre annual return during 2016, rising 7.27%, although the index rose approximately about 338.6% during the calendar years between 2009 and 2016, an annualized return of an impressive 20.30%.  The Nasdaq-100 has rebounded in the first half of 2017, rising approximately 16.78% through the market close on June 30, 2017.

I still believe that the Nasdaq-100 is in the beginning or middle stages of a multi-year secular bull market run as investors reconsider the potential of high tech companies.  The Nasdaq-100 returned a total of about 4025.37% between 1986 and 2016, an annualized return of about 12.75%.  This greatly outperforms the total return of  about 2062.07%, or about 10.42% of the the S&P 500 Index during the same period of time.

1980 - 2016 Stock Market Returns for Various Indices

The chart shown below (click on the chart for a larger view) 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**.

2016 was a decent year for stock market indices, most of which rebounded from subpar returns during 2015.  Most of the indices dropped during early 2016 and then remained relatively flat until Donald Trump won the 2016 U.S. Presidential election as investors were optimistic about a pro-business Presidential administration and a Republican-controlled Congress.  Tax cuts, a lowered bar for repatriation of foreign retained earnings, reduced business regulations, and a likely repeal of Obamacare sent the markets soaring higher during the last 7 weeks of 2016.

Of the indices shown in the chart below, small caps and value led the way, with the Russell 2000 Value Index rising 31.74%, the Russell 2000 Index rising 21.31%, and the S&P/Citi 500 Value Index rising 17.40%.  Foreign stocks continued their struggles of recent years, with the MSCI EAFE Index experiencing its third consecutive year of subpar returns, rising just 1.0%.  Bonds also under-performed, with the Barclays Capital Aggregate Bond Index rising a mere 2.65%.

As shown in the chart below, the Russell 2000 Value Index provided the strongest returns by far between 1980 and 2016, returning a total of 8,383%, an annualized return of about 12.75% per year. The total return of the Russell 2000 Value Index since December 31, 1979 is more than 2,800% greater than the total return of 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 2010-2016.  I have not been able to obtain total returns for the Nasdaq Composite for calendar years prior to 2010.