Published Tue, 25 Sep 2018 05:45:08 -0400 on Seeking Alpha
As interest rates have risen in the last year, we have seen a number of charts similar to the one below comparing the yield on the 3-Month US Treasury (UST) to the dividend yield of the S&P 500. For the vast majority of the current bull market (up until only a couple months ago) short-term interest rates have been below the dividend yield of the S&P 500. Since the FOMC began hiking rates over two years ago, short-term UST rates have risen. This year, they rose above the S&P 500 dividend yield; a key inflection point creating talk that the higher yield on cash makes UST more attractive than equities.
Relative to the current bull market, this may seem impressive. On a longer time horizon, though, this is not the case. Prior to 2009, instances where short-term Treasuries yielded less than the S&P 500 were few and far between. This cross in yields is by no means a red flag for equities, rather, it is a return to what has been historically normal.
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|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|NUVEEN TAX-ADVANTAGED DIVIDEND GROWTH FUND||16.50||0.0||0.00||0.00||7.31|
|ISHARES DOW JONES SELECT DIVIDEND INDEX FUND||103.22||0.0||0.00||3.37||3.31|
|SPDR S&P DIVIDEND ETF||103.80||0.0||0.00||2.42||2.36|
|VANGUARD EXTENDED DURATION TREASURY ETF||137.28||0.0||0.00||0.00||2.29|
|VANGUARD DIVIDEND APPRECIATION ETF||120.84||0.0||0.00||0.00||1.58|
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