Saturday, March 27, 2010

Dow Price/Dividend Ratio and Dividend Yield History (thru 2012)

This post graphs stock market dividend yields since 1900 and shows that they are at historically low levels. Since the price/dividend ratio is the inverse of dividend yield, valuations based upon p/d ratio are at an all-time high. Historically, expensive markets such as these have produced disappointing long-term returns.

I've argued elsewhere that valuation is important -- it is important not to overpay for investments. A common basis for valuation is earnings; investors decide how expensive the market is based upon how much one has to pay for one dollar of earnings -- the price / earnings ratio. In this blog, I refine that a bit and look at normalized price/earnings ratios. (About Normalized P/E Ratios describes my normalization process.) However, this is not the only way to assess valuation. Another popular valuation metric is the price/dividend ratio -- how much must an investor pay for one dollar of dividends (or, conversely, what is the investor's dividend yield)?

100 Years of Stock Market Price/Dividend Ratio History

Graph of 100 year history of stock market (Dow) price/dividend ratio thru 2012
Dow Price/Dividend Ratio History

The above chart (click to expand) shows the 100-year history of

Wednesday, March 10, 2010

The 10-Year Stock Market Projection

This post presents my "official" projected stock market returns for the 10 years beginning in January 2012. It also compares previous 10-year projections with the actual results.

Note: I do this "formal" projection once a year when earnings are published.  For the most recent informal (& text-only) monthly update, see March, 2013 Stock Market Performance 

Projected 10-Year Stock Market Returns

Stock market (Dow Jones Index) forecast for next 10 Years performance /returns
Projected Dow 10-Year Returns

The above graph (click to expand) shows my projected returns for the DJIA (Dow Jones Industrial Average) for the twelve 10-year periods beginning end-of-year 2000 through end-of-year 2011. The blue dashed line shows the returns that I estimated that a hypothetical investor in the stock market would receive over the next ten years 

Tuesday, March 2, 2010

March 2010 Stock Market Update

100 Year Stock Market (Dow) Chart with 25-Year Moving Average

Stock market 25-year moving average graph

Above is the chart introduced and analyzed in 100 years of stock market (Dow Jones) history -- with the addition of