Corporate Finance Briefing: NIPA vs. S&P 500 Dividends
Yardeni Research, Inc.
October 1, 2021
Dr. Edward Yardeni 516-972-7683 [email protected]
Joe Abbott 732-497-5306 [email protected]
Mali Quintana 480-664-1333 [email protected]
Please visit our sites at www.yardeni.com blog.yardeni.com
thinking outside the box Dividends Figure 1. 1600 1600 DIVIDENDS IN CORPORATE PROFITS (billion dollars, 4-quarter sum) 1400 Q2 1400
1200 Dividends 1200 All Corporations (1384.2) Nonfinancial Corporations (815.2) 1000 S&P 500 (501.2) 1000
800 Q2 800
600 600 Q3
400 400
200 200
yardeni.com 0 0 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Source: Federal Reserve Board, Financial Accounts of the United States, Standard & Poor’s and Bureau of Economic Analysis.
Figure 2. 75 75 S&P 500 DIVIDEND YIELD 70 70 (trailing 4-quarter sum) Q3 65 65
60 60 Invested in 1970 (68.7) 55 Invested in 1980 (43.7) 55 Invested in 1990 (17.9) 50 50 Invested in 2000 (4.5) 45 Invested in 2010 (4.7) 45
40 40
35 35
30 30
25 25
20 20
15 15
10 10
5 5 yardeni.com 0 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
Source: Standard & Poor’s Corporation.
Page 1 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 3. 20 20 TREASURY BILL YIELD VS S&P 500 DIVIDEND YIELD (percent)
15 15 Three-Month Treasury Bill Yield S&P 500 Dividend Yield* yardeni.com
10 10
5 5
Q3
0 0 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* S&P 500 four-quarter trailing dividends per share divided by quarterly closing value of the S&P 500 index. Source: Standard & Poor’s and Federal Reserve Board.
Figure 4. 100.2 100.2 80.2 S&P 500 DIVIDENDS & RETAINED EARNINGS PER SHARE 80.2 60.2 (dollars, trailing 4-quarter sum, ratio scale) Q3 60.2 40.2 40.2
20.2 20.2
Dividends Retained Earnings*
yardeni.com .2 .2 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* Reported earnings minus dividends per share. Source: Standard & Poor’s.
Page 2 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 5. 100 100 S&P DIVIDEND PAYOUT RATIOS* (percent) 80 S&P 500 80 S&P Industrials 60 60
40 40 Q2
20 20
0 0 100 100 S&P 500 COMPANIES PAYING A DIVIDEND 95 (percent of total) 95 90 90
85 85
80 80 2020 75 75
70 70 yardeni.com 65 65 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* Four-quarter trailing dividends per share divided by four-quarter trailing reported earnings. Source: Standard & Poor’s Corporation and FactSet.
Figure 6. 150 150 DIVIDEND PAYOUT RATIOS (percent)
100 100
Q2 50 50
Q2
0 0 NIPA Dividends (as a percent of NIPA After-Tax Profits*) (57.8) S&P 500 Dividends (as a percent of S&P 500 reported net income) (30.1) yardeni.com -50 -50 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
* From Current Production. Including IVA & CCadj. These two adjustments restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. Source: Federal Reserve Board, Financial Accounts of the United States, Standard & Poor’s and Bureau of Economic Analysis.
Page 3 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 7. 18 18 S&P 500 FORWARD EARNINGS YIELD vs DIVIDEND YIELD (percent) 16 16
14 14 S&P 500 Dividend Yield* (1.38) 12 S&P 500 Forward Earnings Yield** (4.81) 12
10 10
8 8
6 6
Sep 4 4
2 2 Q3 yardeni.com 0 0 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25
* S&P 500 four-quarter trailing dividends per share divided by quarterly closing value of the S&P 500 index. ** S&P 500 12-month forward consensus expected operating earnings divided by S&P 500 stock price index. Source: Standard & Poor’s and Federal Reserve Board.
Figure 8. 18 18 THREE-MONTH TREASURY BILL YIELD vs. S&P 500 FORWARD EARNINGS YIELD (percent) 16 16
14 14 Three-Month Treasury Bill Yield (0.04) 12 S&P 500 Forward Earnings Yield* (4.81) 12
10 10
8 8
6 6
Sep 4 4
2 2
yardeni.com 0 Sep 0 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25
* S&P 500 12-month forward consensus expected operating earnings divided by S&P 500 stock price index. Source: Standard & Poor’s and Federal Reserve Board.
Page 4 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 9. 7010 7010 6010 1% 6010 5010 BLUE ANGELS: S&P 500 INDEX AND DIVIDEND YIELD 5010 4010 (ratio scale) 9/29 4010 3010 2% 3010 2010 3% 2010 S&P 500 Index 4% 09/29/21 5% 1010 Blue Angels S&P 500 Using 6% 1010 Implied Dividend Yield*
yardeni.com 10 10 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25
* Blue lines show hypothetical values of S&P 500 stock price index using actual S&P 500 dividend (4-quarter trailing sum) divided by dividend yields from 1.0% to 6.0%. Source: Standard & Poor’s.
Figure 10. 7030 7030 6030 1% 6030 5030 S&P 500 INDEX AND DIVIDEND YIELD 5030 4030 (ratio scale) 4030 3030 2% 3030 S&P 500 Index 2030 09/29/21 3% 2030 S&P 500 Blue Angels 4% Implied Price Index* 5% 1030 6% 1030
yardeni.com 30 30 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24
* Blue lines show hypothetical values of S&P 500 stock price index using actual S&P 500 dividend (4-quarter trailing sum) divided by dividend yields from 1% to 6% Source: Standard & Poor’s.
Page 5 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 11. 1400 2020 1400 CORPORATE DIVIDENDS: TOTAL vs S CORPORATIONS (billion dollars)
1200 1200
Corporate Dividends* 1000 S Corporations Dividends 1000
800 800
600 600 2017
400 400
200 200
yardeni.com 0 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
* Annual sum of quarterly data. Source: Bureau of Economic Analysis and IRS Statistics of Income.
Figure 12. 50 50 S CORPORATION DIVIDENDS (as a percent of Corporate Dividends*)
40 2017 40
30 30
20 20
yardeni.com 10 10 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
* Annual sum of quarterly data. Source: Bureau of Economic Analysis and IRS Statistics of Income.
Page 6 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 13. 70 70 S&P 500 DIVIDEND PAYOUT RATIO* (percent) 65 65
60 60
55 55
50 50
45 45
40 40
35 35 Q2
30 30
yardeni.com 25 25 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
* Four-quarter trailing total dividends divided by four-quarter aggregate operating earnings. Source: Standard & Poor’s.
Figure 14. 18 18 S&P 500 DIVIDEND YIELD vs 10-YEAR TREASURY BOND YIELD (percent) 16 16
14 14 10-Year US Treasury Yield (1.37) 12 S&P 500 Dividend Yield* (1.38) 12
10 10
8 8
6 6
4 4
2 2 SepQ3 yardeni.com 0 0 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26
* S&P 500 four-quarter trailing dividends per share divided by quarterly closing value of the S&P 500 index. Source: Standard & Poor’s and Board of Governors of the Federal Reserve System.
Page 7 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Dividends Figure 15. 630 630 570 S&P 500 DIVIDENDS 570 510 (billion dollars, 4-quarter sum, ratio scale) Q3 510 450 450 Q2 390 390 330 330
270 270 S&P 500 Dividends 210 Nominal (501.2) 210 Real* (424.0) 150 150
90 90
yardeni.com 30 30 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
* Deflated by GDP Personal Consumption Expenditures Deflator. Source: Federal Reserve Board, Financial Accounts of the United States, Standard & Poor’s and Bureau of Economic Analysis.
Page 8 / October 1, 2021 / NIPA vs. S&P 500 Dividends Yardeni Research, Inc. www.yardeni.com Copyright (c) Yardeni Research, Inc. 2021. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports and podcasts posted on www.yardeni.com, blog.yardeni.comhttp://blog.yardeni.com, and YRI’s Apps are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments.
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