P/Es could still rise further, but dividend investors should consider putting a ceiling on their purchase prices so they can maintain desired yields without paying too much. At a fixed P/E, you earn a return that's equal to your dividend yield plus the earnings-growth rate for the companies you own or the market overall. If the P/E is too high and that number comes down, you don't earn as much as the companies actually are providing in the form of return components. So this is making me a little nervous. It's not overvalued territory yet, at least on these shorter-run valuation metrics. Certainly the Shiller P/E will suggest something very different, that the stock market is significantly overvalued.
Source: Morningstar
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