Dividend Yield S&P 500 near record lows. Source: Bloomberg Despite Monday’s decline in US stocks, the S&P 500’s dividend yield is near record lows. This could prevent an aggressive sell-off in 10-year Treasuries in the short term.
The index’s projected dividend yield reached 1.44% on Monday, just one basis point above the lowest level ever seen in data compiled by Bloomberg since 2006. This may partly explain the buying we have seen on 10-year Treasuries this month, which has pushed their yield down since peaking at 1.77%.
Where do we go from here? Here are some scenarios assuming the dividend yield will be higher / lower in 10 basis point increments:
S&P 500 dividend yield near record lows. Source: Bloomberg
The key point to keep in mind is that while dividend yields are close to record lows by themselves, there is nothing to prevent them from going down – at least in theory. In fact, the dividend yield minus the 10-year Treasury bond rate has been negative and in many cases has been below -100 basis points over the past 10 years.