{"id":4792,"date":"2012-07-08T21:20:05","date_gmt":"2012-07-09T01:20:05","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=4792"},"modified":"2012-07-08T21:20:05","modified_gmt":"2012-07-09T01:20:05","slug":"sp-indices-sp-500-stock-buybacks-decrease-for-first-time-since-q2-2009","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/07\/08\/sp-indices-sp-500-stock-buybacks-decrease-for-first-time-since-q2-2009\/","title":{"rendered":"S&P 500 dividend yields signal oversold?"},"content":{"rendered":"

Historically the S&P 500 was considered overbought — and ripe for a bear market — when the dividend yield dropped below 3 percent. A surge in share buybacks in the past two decades, however, disrupted this relationship, with the dividend yield falling close to 1.0 percent in the Dotcom era.<\/p>\n

\"S&P<\/p>\n

What happens when we adjust for share buybacks?<\/h4>\n

In 2011, S&P 500 share buybacks increased to $409.0 billion<\/a>. With dividends of $298 billion*, that gives a total cash distribution (dividends and buybacks) of $707 billion for a yield of 5.44 percent. Right in the middle of the 5.0 to 6.0 percent range previously considered typical of an oversold market.<\/p>\n

* S&P 500 market capitalization of $12,993 billion at June 29, 2012 multiplied by 2.29 percent<\/span><\/p>\n

Unfortunately share buybacks fluctuate wildly with the state of the market:<\/p>\n

\"S&P<\/p>\n

If we omit the highest and lowest readings, and take the average share buyback over the remaining 3 years, it amounts to $349 billion. That would give adjusted total cash distributions of $614 billion and an adjusted yield of 4.98 percent — still close to the oversold range.<\/p>\n

Compare to Earnings Yield<\/h4>\n

The current reported earnings yield of 6.8 percent, however, is way below the highs (10 to 14 percent) of the 1970s and 80s<\/a>. Current distributions (dividends plus buybacks) amount to 80 percent of current earnings. Payout ratios above 60 percent are considered unsustainable.<\/p>\n

My conclusion is that earnings yield offers a more accurate measure of value. And reflects a market that is fairly valued — rather than overbought or oversold — especially when we consider the likelihood of earnings disappointments.<\/p>\n","protected":false},"excerpt":{"rendered":"

Historically the S&P 500 was considered overbought — and ripe for a bear market — when the dividend yield dropped below 3 percent. A surge in share buybacks in the past two decades, however, disrupted this relationship, with the dividend yield falling close to 1.0 percent in the Dotcom era. What happens when we adjust … <\/p>\n

Continue reading “S&P 500 dividend yields signal oversold?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[48,34],"tags":[1052,1159,2626,3010,3102],"class_list":["post-4792","post","type-post","status-publish","format-standard","hentry","category-earnings-dividends","category-us-canada-countries-regions","tag-dividend-yield","tag-earnings-yield","tag-pe-ratio","tag-sp-500","tag-share-buybacks"],"yoast_head":"\nS&P 500 dividend yields signal oversold? - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"S&P 500 dividend yields signal oversold? - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Historically the S&P 500 was considered overbought — and ripe for a bear market — when the dividend yield dropped below 3 percent. 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Forward estimates for 2017 contracted by an average of 4.6% over the last 12 months but not sufficient to raise the forward Price-Earnings Ratio above 20. That is the\u2026","rel":"","context":"In "Earnings & Dividends"","block_context":{"text":"Earnings & Dividends","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/earnings-dividends\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":15288,"url":"https:\/\/thepatientinvestor.com\/index.php\/2017\/05\/15\/is-the-asx-over-priced\/","url_meta":{"origin":4792,"position":1},"title":"Is the ASX over-priced?","author":"ColinTwiggs","date":"May 15, 2017","format":false,"excerpt":"On the weekend I discussed how earnings for the S&P 500 have grown by roughly 6.0% over the last three decades but the growth rate should rise as stock buybacks have averaged just over 3.0% a year since 2011. In an ideal world the growth rate would lift to close\u2026","rel":"","context":"In "Australia & NZ"","block_context":{"text":"Australia & NZ","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/countries-regions\/australia-nz-countries-regions\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17993,"url":"https:\/\/thepatientinvestor.com\/index.php\/2019\/03\/22\/buybacks-interest-rates-and-declining-earnings-growth\/","url_meta":{"origin":4792,"position":2},"title":"Buybacks, interest rates and declining growth","author":"Colin Twiggs","date":"March 22, 2019","format":false,"excerpt":"The Fed did a sharp about-turn on interest rates this week: a majority of FOMC members now expect no rate increases this year. Long-term treasury yields are falling, with the 10-Year breaking support at 2.55\/2.60 percent. Expect a test of 2.0%. While the initial reaction of stocks was typically bullish,\u2026","rel":"","context":"In "Debt Levels"","block_context":{"text":"Debt Levels","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/debt-levels\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6178,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/11\/14\/the-most-compelling-argument-for-equities-pragmatic-capitalism\/","url_meta":{"origin":4792,"position":3},"title":"The Most Compelling Argument for Equities | Pragmatic Capitalism","author":"Colin Twiggs","date":"November 14, 2012","format":false,"excerpt":"Cullen Roche quotes David Rosenberg: The Fed has also completely altered the relationship between stocks and bonds by nurturing an environment of ever deeper negative real interest rates. Therein lies the rub. The economy and earnings are weak, and getting weaker, but the interest rate used to discount the future\u2026","rel":"","context":"In "Earnings & Dividends"","block_context":{"text":"Earnings & Dividends","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/earnings-dividends\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7555,"url":"https:\/\/thepatientinvestor.com\/index.php\/2013\/04\/24\/dr-eds-blog-dividends-buybacks-the-bull-market-excerpt\/","url_meta":{"origin":4792,"position":4},"title":"Dr. Ed’s Blog: Dividends, Buybacks, & the Bull Market (excerpt)","author":"ColinTwiggs","date":"April 24, 2013","format":false,"excerpt":"Ed Yardeni highlights that a surge in dividends and share buybacks is driving the current bull market: Most importantly, during the current earnings season, US corporations continue to announce dividend increases and more share buybacks. Previously, I\u2019ve shown that this corporate cash flow into the stock market--which totaled $2.1 trillion\u2026","rel":"","context":"In "Earnings & Dividends"","block_context":{"text":"Earnings & Dividends","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/earnings-dividends\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13396,"url":"https:\/\/thepatientinvestor.com\/index.php\/2016\/05\/25\/stock-buybacks-short-term-gain-long-term-pain\/","url_meta":{"origin":4792,"position":5},"title":"Stock buybacks: Short-term gain, long-term pain","author":"ColinTwiggs","date":"May 25, 2016","format":false,"excerpt":"Companies are maintaining stock buybacks and dividends payouts despite falling earnings. Combined buybacks and dividend payouts for S&P 500 corporations exceeded earnings by an estimated $572 billion for 2015. The chart below illustrates how stock buybacks, for S&P 500 stocks, have grown to exceed dividend payouts. The combined figure now\u2026","rel":"","context":"In "Stock Markets"","block_context":{"text":"Stock Markets","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/stock-markets\/"},"img":{"alt_text":"S&P 500 Stock Buybacks and Dividends compared to Earnings","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-05-25-spx-buybacks.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-05-25-spx-buybacks.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-05-25-spx-buybacks.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/4792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=4792"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/4792\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=4792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=4792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=4792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}