My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Mon, 14 Mar 2011 15:43:03 -0700 Time For a PE Ratio History Lesson. http://myhighdividendstocks.posterous.com/time-for-a-pe-ratio-history-lesson http://myhighdividendstocks.posterous.com/time-for-a-pe-ratio-history-lesson

The S&P 500 index has had quite a run since its March 2009 bottom.  It hit bottom at 666 points on March 9th, 2009 and has powered 94.5% higher to 1,249 today.

http://bit.ly/SP5003yrs

I think it’s time to reexamine the S&P 500 PE ratio.  Are we closer to a market top or a market bottom?  The price to earnings ratio for the S&P 500 is currently 18 (http://www.decisionpoint.com/tac/Swenlin.html ).  It has been around or above 20 since 2003.  I don’t think that the market is anywhere near the value level.

Time for a little price to earnings ratio history lesson.  The following excerpt comes from the book Security Analysis (2nd Edition) pg. 536 and it is enlightening 71 years later.

* * * * * * *

In previous chapters various references have been made to Wall Street’s ideas on the relation of earnings to values.  A given common stock is generally considered to be worth a certain number of times its current earnings.  This number of times, or multiplier, depends partly on the prevailing psychology and partly on the nature and record of the enterprise.  Prior to the 1927-1929 bull market ten times earnings was the accepted standard of measurement.  More accurately speaking, it was the common point of departure for valuing common stocks, so that an issue would have to be considered exceptionally desirable to justify a higher ratio, and conversely.

            Beginning about 1927 the ten-times-earnings standard was superseded by a rather confusing set of new yardsticks.  On the one hand, there was a tendency to value common stocks in general more liberally than before.  This was summarized in a famous dictum of a financial leader implying that good stocks were worth fifteen times their earnings.1  There was also the tendency to make more sweeping distinctions in the valuations of different kinds of common stocks.  Companies in especially favored groups, e.g., public utilities and chain stores, in 1928-1929, sold at a very high multiple of current earnings, say, twenty-five to forty times.  This was true also of the “blue chip” issues, which comprised leading units in miscellaneous fields.  As pointed out before, these generous valuations were based upon the assumed continuance of the upward trend shown over a longer or shorter period in the past.  Subsequent to 1932 there developed a tendency for prices to rule higher in relation to earnings because of the sharp drop in long-term interest rates.

* * * * * * *

This chart confirms that there has been a change in investor valuation of common stocks over the years.  The bottoms of S&P 500 has been rising.  Too bad the chart cuts off in 2003.

Image001

  How low did the S&P 500 P/E ratio fall to during the Panic of 2008-2009?

It didn’t fall during the panic.  On the contrary, it skyrocketed because earnings were falling faster than stock prices.    It has settled in the 18-20 PE range since the end of 2009.  Dividend yields tend to be highest at market bottoms.  The last time the S&P 500 yielded over 6% was in 1982.  We are closer to the top of the market than the bottom.  If you are in the market, then you should make plans to get out before the next financial crisis.

Current price to earnings ratios of stock mentioned often on this blog:

American Capital Agency Corp. (AGNC) – 4.00

SafeBulkers Inc. (SB) – 4.98

SeaDrill (SDRL) – 13.70

Terra Nitrogen (TNH) – 13.51

AGNC and SafeBulkers are high dividend stocks in the value zone, but only SafeBulkers has earning power and a strong balance sheet.

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Mon, 28 Feb 2011 11:09:32 -0800 Farrell Predicts Market Crash 2011: It Will Hit by Christmas http://myhighdividendstocks.posterous.com/farrell-predicts-market-crash-2011-it-will-hi http://myhighdividendstocks.posterous.com/farrell-predicts-market-crash-2011-it-will-hi

Image001
Paul B. Farrell

Feb. 22, 2011, 12:01 a.m. EST

Market Crash 2011: It will hit by Christmas

Commentary: The S&P 500 is worth only 910. Get out or lose big

Mr. Farrell, behavioral economics columnist and former Morgan Stanley investment banker, recently wrote a damning commentary on the lies that Wall Street and the Federal Reserve continue to feed you.  Ignore it at your own peril.

There will be another opportunity to buy high dividend stocks at or near the bottom of the next phase down in this Federal Reserve induced bust (bear market).  Keep your invested savings on the sideline in a money market fund.  Make sure you are raising your trailing stops on your winning high dividend stocks.

http://bit.ly/BearMarket

Subscribe today for free at www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

(Hat tip to Larry)

Be seeing you!

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Fri, 11 Feb 2011 11:41:00 -0800 TIP OF THE WEEK - Four Important Tickers to Monitor on a Weekly Basis. They Affect Your Wealth. http://myhighdividendstocks.posterous.com/tip-of-the-week-four-important-tickers-to-mon http://myhighdividendstocks.posterous.com/tip-of-the-week-four-important-tickers-to-mon Four Important Tickers to Monitor on a Weekly Basis. They Affect Your Wealth.
Jason Brizic
Feb. 11, 2011

Last week's tip of the week focused on how I like to setup my chart views and indicators on www.stockcharts.com . Click on this link to read last week's tip of the week (http://bit.ly/LastTotW ). This week I would like to offer you my list of favorite tickers that I monitor using StockCharts.com and briefly why. This will save you time looking them up.

S&P 500 index - Use ticker $SPX. This ticker returns the S&P 500 large cap index. It is more representative of the US stock market than the Dow Jones Industrial Average of 30 stocks. The Dow is abnormally high because AIG was replaced by Kraft Foods. Big losers like AIG don't fall out of the S&P500 so easily. Consider the S&P 500 to be the market your trying to beat with your high dividend stock portfolio.
http://bit.ly/3yrSP500 Gold - Use ticker $GOLD. This ticker returns the price of gold at the end of the day. Physical gold coins belong in your investment plans as a crisis hedge and non-correlator. Unfortunately you can't see the intraday price of gold with this one. Use www.kitco.com or symbol GLD on Google Finance or stockcharts.com to see gold's intraday moves. Remember to multiply GLD's price times ten to get the price of gold. GLD does have one advantage over the kitco.com spot prices - GLD includes volume info.
http://bit.ly/3yrGold Oil - Use ticker $WTIC. WTIC stands for west Texas intermediate crude otherwise known as light crude oil. We can use oil as a non-correlator in our high dividend stock portfolios. So it is important to know the recent price of oil has been before you purchase any energy related ETFs, oil stocks, or energy related mutual funds. Also, many oil related stocks have high dividends above 6%. You can factor the oil price into your decision to buy high dividend oil stocks.
http://bit.ly/3yrOil Commodities - Use ticker $CCI. The Continuous Commodities Index (CCI) is an index of commodities which is not dominated by oil. It includes other commodities such as grains, meats, tropicals, and metals. For more info on this commodity index please go here: http://www.zealllc.com/2008/commcycl.htm. Commodities are good non-correlators for your portfolio and some of them like copper are leading economic indicators. Price inflation also hits commodities first. It is important to monitor them. The CCI lets you view them as a group.
http://bit.ly/3yrCommodities For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

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Tue, 18 Jan 2011 13:19:04 -0800 A Disturbing Fact Regarding S&P500 Dividend Yields http://myhighdividendstocks.posterous.com/a-disturbing-fact-regarding-sp500-dividend-yi http://myhighdividendstocks.posterous.com/a-disturbing-fact-regarding-sp500-dividend-yi

I recently embarked on a quest to find S&P500 stocks yielding over 6 percent.  I was shocked by the results.  There are only seven S&P500 stocks currently yielding over 6 percent.

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Company

Ticker

Yield

Industry

Frontier Communications

FTR

7.71%

Rural telecom

Windstream

WIN

7.17%

Rural telecom

Diamond Offshore Drilling

DO

6.73%

Oil drilling

Altria

MO

6.42%

Tobacco

Century Link

CTL

6.28%

Rural telecom

Reynolds American

RAI

6.13%

Tobacco

Pitney Bowes

PBI

6.12%

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That is just plain sad.  I once read that the S&P500 yielded around 6.7% back in 1982.  Today the index yields a paltry 1.7%.  A depression level bear market could bring the S&P500 yields back to the 6.7% level.  That depression will come when the Federal Reserve stops buying US Treasury debt.  You had better be holding high dividend stocks with earning power and strong balance sheets in your hand when the music stops.

Look for some analysis on these stocks in future posts.

There will be a multitude of stocks currently yielding between 4.00 and 5.99% that will become high dividend stocks when the Federal Reserve tightens and investors run for the exits.  This will mark the return of the bear market.  There will be high dividend stock bargains not seen since March 2009 when that happens.  Subscribe to www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.

Be seeing you!

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Mon, 03 Jan 2011 16:03:54 -0800 Are dividend stocks really less volatile than growth stocks? http://myhighdividendstocks.posterous.com/are-dividend-stocks-really-less-volatile-than http://myhighdividendstocks.posterous.com/are-dividend-stocks-really-less-volatile-than

Are dividend stocks less volatile than growth stocks?  I read the following recently:

Typically, dividend stocks fall much less than the overall equity market as investors flock to the safety net that dividends provide.  During the recent 2000 through 2002 bear market, the DJIA, which is made up of large mature dividend-paying stocks, fell 37.85 percent while the more growth-oriented indexes like the Nasdaq and the S&P 500 fell 77.93 percent and 49.15 percent, respectively (from their highest closing values in 2000 to their lowest closing values in 2002)”

I’ll accept the above as fact.  Now that we know what happened during the dot.com bubble; what happened to the dividend stocks during the Panic of 2008?

Please click on the Google Ads if you like the content of this blog and you want more of it.  I'm evaluating the profitability of this blog with the responses to those ads.  If you don't see the Google Ads, then please visit my main site at www.myhighdividendstocks.com and give them a click.  Thanks you for your support.

During the recent 2007 through 2010 bear market the DJIA fell 52 percent while the Nasdaq and S&P500 fell 53 percent and 56 percent respectively (from their highest closing values in 2007 to their lowest closing values in 2009).  Wait a minute.  Something isn’t right here.  It appears that during the Panic of 2008 the DJIA dividend stocks depreciated as much in price as much as their growth stock buddies in the Nasdaq and the S&P500.  Why can this be?

HYPOTHESIS - The puny DJIA dividend makes them behave more like growth stocks.

The DJIA’s average dividend yield in 1944 was 4.47 percent.  Today it is 2.77 percent.

What was the DJIA dividend yield in 2007 and 2009?  According to one article I read the DJIA yield in October 2007 was 2.89%  It probably approached 4 percent at the March 2009 lows, but I don’t have an exact figure.  Likewise the S&P 500 had a dividend yield of 1.81 percent in October 2007.

What does the Nasdaq yield?  The Nasdaq 100 currently yields somewhere between 0.70 percent and 0.27 percent depending on the source.

What does the S&P500 yield?  The S&P500 currently yields 1.71 percent.

The point is that the DJIA dividend yield is not much greater than the S&P500 although it is about 3 times greater than the Nasdaq.  They all declined about the same percentage in 2007-2009.

This begs the question - What was the DJIA yielding in 2000?  Was there a greater disparity amongst the three markets back when the dot.com bubble burst?  The DJIA yielded 1.4 percent in 2000.  What was the S&P500 yielding in 2000?  I’m not sure, but it was yielding 1.4 percent in 1998.  What was the Nasdaq yielding in 2000?  I can’t figure out what the Nasdaq yield was for the year 2000, but I’m guessing it was miniscule.

Now I’m scratching my head.  When the DJIA dropped 37 percent it yielded around 1.4 percent.  The S&P500 dropped 49 percent when I’m guessing it yielded maybe 1.0 to 1.2 percent (I’m accounting for index gains since 1998 and a slightly increasing divided for the index).

Something else besides strictly dividend yields must be the causation for the similarities in the percentage declines of these indexes in 2007-2009.  In my next article I will examine how some large companies yielding more than 6 percent in 2007 faired during the Panic of 2008.  Perhaps several high dividend stocks from various industries will shed some light on this mystery.

Dear reader, please click on the Google Ads at my main site (www.myhighdividendstocks.com).

Be seeing you!                                                                       

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