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Bond yield versus Dividend yield

Bonds versus Stocks
(Bond yield versus Dividend yield)

The yield on the 30-year Treasury bond which this week just fell below the S&P 500's dividend yield SPX, was reversing a relationship that - with only a couple of minor exceptions in recent years - has held since the year 1958.

S&P 500 dividend yield and US Treasury yields since 1950 (Status: Aug. 2019)

Individual stocks now yield more than 5-, 10-, and 30-year US Treasury bonds, according to Bespoke's (Investment Group) research. As of this week (Last week of August 2019), two-thirds of the stocks in the S&P 500 yield more than the 5-year. More than 60% yield more than the 10-year, and roughly half are yielding more than the 30-year note.

"The takeaway is, if you can get an annual yield from a company that's going to pay you more than the 30-year Treasury and the company has a history of raising its dividend, for the long term, it's a better alternative than a Treasury," Bespoke Investment Group co-founder Paul Hickey said.

It's worth noting that most bond investors nowadays have no memories of the devastating bond bear-market that lasted from the late 1950s to the early 1980s. It will take a lot to overcome the serene view investors now have of the extraordinary bond bull-market of recent years.


In the equity arena, in contrast, investors' memories of the 2008 Great Recession remain fresh, and memories of the 2000 internet bubble also are more a part of investor consciousness than the devastating bond bear-market of prior decades.
This also suggests that the stock market's dividend yield may remain high relative to the Treasury yield...