Dividends4Life: No Dividend Bubble

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No Dividend Bubble

Posted by D4L | Wednesday, August 29, 2012 | 0 comments »

I know it's strange to see stocks going up at all, so any sort of rally must be a "bubble". While it's clear to me that the idea of using equities in place of super-rich bonds is finally taking off, I would suggest that it's rational, it's not really taking prices to unrealistic levels for the most part, and this is a trend that could last for a very long time. Some may recall when I first wrote about this subject 2 years ago - I was early.

We aren't in a bubble, and here is the proof. Using Baseline, I screened the S&P 500. At present, 246 names have dividend yields greater than the index yield of 2%. Of these, 175 are up less than 12% YTD. In other words, the generous dividend-payers, on average, are trailing the S&P 500. Check out these statistics for the group: Average Yield: 3.5%, Average YTD Price Return: -0.3%, Average PE: 12.0, Average PE/10-year Median: 0.9. This doesn't look like a bubble at all!

Source: Seeking Alpha

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