S&P 500 Dividend & Earnings Yield

Yardeni Research, Inc.

September 23, 2021

Dr. Ed 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 Table Of Contents TableTable OfOf ContentsContents

S&P 500 Earnings Yield 3-11

September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 1. 15 15 S&P 500 DIVIDEND YIELD vs CPI INFLATION RATE & STOCK MARKET CYCLE

10 S&P 500 Dividend Yield 10 Nominal* (1.35) Real** (-3.45)

5 5

Q2 0 0

-5 -5

yardeni.com -10 -10 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 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. ** Nominal dividend yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Standard & Poor’s and Bureau of Labor Statistics.

Figure 2. 25 25 S&P 500 REPORTED EARNINGS YIELD* vs CPI INFLATION RATE**

20 20

15 S&P 500 Earnings Yield* 15 Nominal (4.63) Real** (-0.22) 10 10

5 Q2 5

0 Q2 0

-5 -5

yardeni.com -10 -10 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 deleted because of negative value. ** Nominal earnings yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. FN3 Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Standard & Poor’s and Bureau of Labor Statistics.

Page 3 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 3. 12 12 S&P 500 REPORTED EARNINGS YIELD* MINUS CPI INFLATION RATE** Latest (-0.22)

9 9

6 6

3 3 Average 3.19

0 Q2 0

yardeni.com -3 -3 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

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 dropped because of large negative value. ** Year-over-year percent change in three-month average of each quarter. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas are bull markets. Source: Standard & Poor’s and Bureau of Labor Statistics.

Figure 4.

14 US EQUITIES REPORTED EARNINGS YIELD* MINUS CPI INFLATION RATE** Latest (-0.66) 14

12 12

10 10

8 8

Average = 4.9 6 6

4 4

2 2

0 0 Q2 yardeni.com -2 -2 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

* Ratio of after-tax corporate profits as reported to the IRS divided by market value of US equities traded in the US excluding foreign issues. ** Year-over-year percent change in quarterly using three-month averages. Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Federal Reserve Board.

Page 4 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 5. 20 20 REAL EARNINGS YIELDS 18 18

16 16 Real Earnings Yields 14 14 All Equities 12 Less Foreign** (-0.66) 12 S&P 500* (-0.22) 10 10

8 8

6 6

4 4

2 2

0 Q2 0 Q2 -2 -2 yardeni.com -4 -4 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

* After-tax corporate profits as reported to the IRS as a percent of market value of US equities traded in the US excluding foreign issues minus CPI inflation rate (y/y in quarterly using 3-ma). ** S&P 500 reported earnings as a percent of quarterly average S&P 500 index minus CPI inflation rate (y/y in quarterly using 3-ma). Q4-2008 dropped because of negative value. Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Federal Reserve Board, Standard & Poor’s, and Bureau of Labor Statistics. Figure 6. 20 20 S&P 500 REPORTED EARNINGS YIELD* (as a percent of quarterly average S&P 500 index, annual rate, nsa)

15 15

10 10

5 5 Q2

yardeni.com 0 0 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 dropped because of negative value. Source: Standard & Poor’s.

Page 5 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 7. 1830 1830 1530 S&P 500 INDEX DIVIDED BY CONSUMER PRICE INDEX Aug 1530 (ratio scale) 1230 1230

930 930

630 630

330 330

yardeni.com 30 30 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21 23 25

Source: Standard & Poor’s and Bureau of Labor Statistics.

Figure 8. 25 25 S&P 500 REPORTED EARNINGS YIELD* vs CPI INFLATION RATE**

20 20

15 S&P 500 Earnings Yield (4.63) 15 CPI Inflation Rate (4.85)

10 10

5 Q2 5

0 0

yardeni.com -5 -5 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 dropped because of negative value. ** Year-over-year percent change in three-month average of each quarter. Source: Standard & Poor’s and Bureau of Labor Statistics.

Page 6 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 9. 12 12 S&P 500 REPORTED EARNINGS YIELD* MINUS CPI INFLATION RATE** Latest (-0.22)

9 9

6 6

3 3 Average 3.19

0 Q2 0

yardeni.com -3 -3 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

Figure 10. 20 20 S&P 500 REPORTED EARNINGS YIELD* vs US TREASURY 10-YEAR BOND YIELD

15 15

S&P 500 Earnings Yield (4.63) US Treasury 10-Year Yield (percent) (1.59) 10 10

5 5 Q2

yardeni.com 0 0 52 57 62 67 72 77 82 87 92 97 02 07 12 17 22 27

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 dropped because of negative value. Source: Standard & Poor’s and Federal Reserve Board.

Page 7 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 11. 10 10 S&P 500 REPORTED EARNINGS YIELD* MINUS US TREASURY 10-YEAR BOND YIELD

5 5

0 0

yardeni.com -5 -5 52 57 62 67 72 77 82 87 92 97 02 07 12 17 22 27

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 dropped because of negative value. Source: Standard & Poor’s and Federal Reserve Board.

Figure 12. 310 310 S&P 500 REPORTED EARNINGS / CONSUMER PRICE INDEX* Q2 260 260 (dollars per share, annualized, ratio scale) 210 210

160 160

110 110

60 60

yardeni.com 10 10 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings divided by consumer price index (three-month average of each quarter). Q4-2008 dropped because of negative value. Source: Standard & Poor’s and Bureau of Labor Statistics.

Page 8 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 13. 25 25 S&P 500 REPORTED EARNINGS YIELD* vs CPI INFLATION RATE**

20 20

15 S&P 500 Earnings Yield (4.63) 15 CPI Inflation Rate (4.85)

10 10

5 Q2 5

0 0

yardeni.com -5 -5 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

Figure 14. 180.1 180.1 150.1 Q2 150.1 120.1 S&P 500 REPORTED EARNINGS PER SHARE 120.1 90.1 (dollars, quarterly, ratio scale 4-quarter sum) 90.1 60.1 60.1

30.1 30.1

yardeni.com .1 .1 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Standard & Poor’s.

Page 9 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 15. 25 25 S&P 500 REPORTED EARNINGS YIELD* & STOCK MARKET CYCLE 20 20

15 S&P 500 Earnings Yield* 15 Nominal (4.77) Real** (2.87) 10 10

5 Q1 5 Q1

0 0

-5 -5

yardeni.com -10 -10 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 deleted because of negative value. ** Nominal earnings yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Standard & Poor’s and Bureau of Labor Statistics.

Figure 16. 25 25 S&P 500 REPORTED EARNINGS YIELD* & BUSINESS CYCLE 20 20

15 15

Real S&P 500 Earnings Yield** (2.87) 10 10

5 5 Q1

0 0

-5 -5

yardeni.com -10 -10 35 40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 deleted because of negative value. ** Nominal earnings yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. Note: Shaded areas are recessions according to the National Bureau of Economic Research. Source: Standard & Poor’s and the Conference Board.

Page 10 / September 23, 2021 / S&P 500 Dividend & Earnings Yield Yardeni Research, Inc. www.yardeni.com S&P 500 Earnings Yield Figure 17. 25 25 S&P 500 REPORTED EARNINGS YIELD* vs LEADING ECONOMIC INDICATORS 20 & STOCK MARKET CYCLE 20

15 May 15 Real S&P 500 Earnings Yield** (2.87) 10 10

5 5 Q1

0 0

-5 -5

-10 -10 Leading Economic Indicators -15 (yearly percent change) (14.73) -15

yardeni.com -20 -20 59 64 69 74 79 84 89 94 99 04 09 14 19 24

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 deleted because of negative value. ** Nominal earnings yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Standard & Poor’s and the Conference Board.

Figure 18. 15 15 S&P 500 REPORTED EARNINGS YIELD* vs LEADING ECONOMIC INDICATORS & STOCK MARKET CYCLE

10 10 Real S&P 500 Earnings Yield** (2.87)

5 5

Q1 May 0 0

-5 -5 LEI: Interest Rate Spread*** (1.56)

yardeni.com -10 -10 59 64 69 74 79 84 89 94 99 04 09 14 19 24

* S&P 500 reported earnings as a percent of quarterly average S&P 500 index. Q4-2008 deleted because of negative value. ** Nominal earnings yield minus CPI inflation rate on y/y basis using quarterly data based on 3-month averages. *** 10-year US Treasury bond yield minus federal funds rate. Note: Shaded red areas are S&P 500 bear market declines of 20% or more. Yellow areas show bull markets. Source: Standard & Poor’s and the Conference Board.

Page 11 / September 23, 2021 / S&P 500 Dividend & Earnings Yield 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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