Wednesday, January 21, 2009

Dividend Yields for major US indexes

When investing in index funds, Investors typically focus on the dividend yields on the indexes as a barometer for the whole market. With yields on major US indexes rising above the 10 year Treasury Notes for the first time in over 50 years, dividend stocks look more promising to investors seeking current investment income.

















One thing to note however is that not all stocks in major US indexes pay dividends. Only 368 out of 500 stocks in the S&P 500 pay dividends. The average yield on those is 3.73% , which is a full percentage point higher than the yield on the broad market benchmark. (source indexarb). Dow Industrials is the most “dividend friendly” index as 29 out of 30 of its components pay dividends. Furthermore most of the stocks in the Dow Industrials also have had a long history of stable dividend rates or consistent dividend raises. General Motors is the only stock in the Dow Jones that doesn't pay a dividend.

Nasdaq 100 is the tech heavy index which consists of only 31 dividend payers, out of 100 stocks in the index overall. Without the power of dividends, the once high flying index might take much longer to reach its 2000 highs versus the fifteen years that took Dow Industrials to reach its 1929 highs after the Great Depression.

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2 comments:

  1. my question is what do you do if the 350 or so S&P divvers start cutting the payouts across the board in order to retain capital? This would only happen if things get much worse, but I've been pondering this for some time.

    ReplyDelete
  2. TW,

    Unless we enter the next great depression it is unlikely that the dividend cuts will amount to too much decrease in S&P 500 dividend payments

    ReplyDelete

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