Sunday, September 25, 2011

Will Stock Dividends Increase Signficantly?

Today, I read an interesting article comparing the S&P composite dividend yield to corporate bond and Treasury yields.  Historically, until the 1950s, dividend yields have been higher than bond yields.  Since the fifties the reverse has been true.  With record profits, it seems to me that companies may start paying higher dividends again.  They probably won't get as high as corporate bond yield, but still higher than than the current level.

Of course, an alternative for dividend yields to increase is for stock prices to decline significantly.  While not a pleasant thought, this is also a likely scenario given the current economic situation.   My guess is a both scenarios are likely to take place: dividend increases and a decline in stock prices.  So I will continue to wait before putting funds back into stocks.  And when I start buying, I will purchase primarily dividend paying stocks.
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This is not financial or investing advice. Please consult a professional advisor.

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