HDBR50 Returns versus Earnings Yield

Research on Safe Withdrawal Rates

Moderator: hocus2004

JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

Mike wrote:$14.78 in 1967, $14.98 in 2003. Hmm.
Once again, Mike brings up a good point.

I have collected data on nominal and real earnings amounts to supplement the data on dividend amounts. I have attached tables.

I have included payout ratios calculated in three different ways. The standard payout ratio is the dividend amount for one year divided by the earnings amount of the same year. The 5-year real payout ratio takes five years of real (i.e., inflation adjusted) dividend amounts and divides it by the same five years of real earnings amounts. The 10-year real payout ratio takes ten years of real (i.e., inflation adjusted) dividend amounts and divides it by the same ten years of real earnings amounts.

The standard (single year) payout ratio jumps around because earnings fluctuate a lot. The 5-year and 10-year payout ratios add more and more smoothing, to dividends as well as earnings.

Payout ratios were very high before 1900. The 10-year payout ratio generally remained above 70%. The 10-year payout ratios were around 60% until 1930. Real earnings dropped abruptly in 1931 and continued to fall until 1933. [Single year] Payouts in 1931-1933 exceeded 100%. The payout ratio in 1934 was 99%. The 10-year payout ratio fell below 60% in 1949. It has remained below 60% ever since then.

The trend has been downward since 1949 with brief interruptions. There have been recent earnings shortfalls in 1991-1994 and 2002-2003. The strength of the 2004 earnings rebound may be exaggerated. Companies may have accelerated their recognition of losses when reporting for the previous two years.

If we compare 1967 to 2003, the real dividend amounts were $14.78 versus $14.98 based on single year earnings of $28.30 and $26.48, respectively. However, 1967 corresponded to an earnings peak and 2003 was close to an earnings valley.

Looking at the 5-year and 10-year payout ratios, we see the real story. In 1967, the 5-year payout ratio was 54.5%. The 10-year payout ratio was 56.1%. In 2003, the 5-year and 10-year payout ratios were 42.7% and 42.5%, respectively.

The real single year (January) earnings from 1964 to 1968 were $22.25, $24.85, $27.81, $28.30 and $26.57. The real single year (January) earnings from 2000 to 2004 were $49.09, $46.74, $23.54, $26.48 and $45.42.

Today's earnings support is much stronger than that of 1967. Today's dividend amounts are much more secure. There is room on the upside for dividend increases.

Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

S&P500 Index

Year, Nominal Earnings Amount, Real Earnings Amount, Real Dividend Amount

Code: Select all

1871   0.400     5.42    3.52
1872   0.403     5.37    3.51
1873   0.433     5.64    3.95
1874   0.460     6.28    4.50
1875   0.452     6.62    4.80
1876   0.353     5.50    4.67
1877   0.282     4.35    4.49
1878   0.301     5.50    3.46
1879   0.316     6.44    3.71
1880   0.389     6.58    3.46
1881   0.486     8.71    4.75
1882   0.439     7.28    5.31
1883   0.428     7.22    5.42
1884   0.393     7.18    6.00
1885   0.307     6.25    6.20
1886   0.275     5.81    5.03
1887   0.333     7.02    4.70
1888   0.352     7.09    5.01
1889   0.263     5.56    4.84
1890   0.299     6.64    4.88
1891   0.294     6.37    4.76
1892   0.343     7.89    5.11
1893   0.361     7.71    5.15
1894   0.252     6.20    6.08
1895   0.168     4.31    5.36
1896   0.247     6.25    4.80
1897   0.218     5.70    4.70
1898   0.313     7.94    4.61
1899   0.361     9.02    5.02
1900   0.480    10.26    4.65
1901   0.482    10.55    6.61
1902   0.511    10.92    6.86
1903   0.622    12.12    6.47
1904   0.527    10.74    7.07
1905   0.505    10.07    6.21
1906   0.678    13.51    6.69
1907   0.752    14.34    7.69
1908   0.653    12.74    8.51
1909   0.595    11.23    7.61
1910   0.758    12.92    7.55
1911   0.718    13.14    8.60
1912   0.599    11.07    8.70
1913   0.694    11.96    8.27
1914   0.621    10.48    8.02
1915   0.550     9.19    7.03
1916   0.934    15.16    7.15
1917   1.509    21.77    8.24
1918   1.256    15.14    8.20
1919   0.985    10.08    5.80
1920   0.919     8.04    4.62

Code: Select all

1921    0.758     6.73     4.49
1922    0.323     3.23     4.64
1923    0.714     7.18     5.14
1924    0.976     9.52     5.19
1925    0.957     9.33     5.41
1926    1.249    11.78     5.73
1927    1.229    11.85     6.72
1928    1.133    11.05     7.58
1929    1.399    13.81     8.49
1930    1.557    15.37     9.58
1931    0.940     9.98    10.26
1932    0.593     7.00     9.36
1933    0.413     5.40     6.48
1934    0.444     5.68     5.64
1935    0.570     7.07     5.59
1936    0.770     9.42     5.87
1937    1.050    12.57     8.74
1938    1.077    12.80     9.43
1939    0.663     8.00     6.19
1940    0.930    11.29     7.57
1941    1.053    12.61     8.06
1942    1.120    12.04     7.56
1943    1.043    10.42     5.89
1944    0.937     9.09     5.95
1945    0.940     8.91     6.10
1946    0.940     8.72     6.18
1947    1.130     8.87     5.60
1948    1.643    11.70     6.01
1949    2.320    16.32     6.66
1950    2.337    16.78     8.26
1951    2.837    18.85     9.88
1952    2.427    15.46     9.00
1953    2.410    15.29     8.95
1954    2.523    15.83     9.14
1955    2.833    17.91     9.78
1956    3.643    22.95    10.52
1957    3.407    20.83    10.62
1958    3.293    19.44    10.53
1959    2.963    17.25    10.23
1960    3.390    19.53    10.75
1961    3.210    18.18    11.03
1962    3.250    18.29    11.40
1963    3.683    20.45    11.86
1964    4.073    22.25    12.55
1965    4.593    24.85    13.62
1966    5.240    27.81    14.54
1967    5.517    28.30    14.78
1968    5.367    26.57    14.50
1969    5.780    27.41    14.60
1970    5.730    25.59    14.13
1971    5.160    21.88    13.27
1972    5.737    23.56    12.61
1973    6.547    25.94    12.51
1974    8.227    29.80    12.32
1975    8.743    28.33    11.74
1976    8.193    24.87    11.18
1977    9.967    28.76    11.82
1978   10.900    29.44    12.73
1979   12.653    31.27    12.64
1980   15.003    32.55    12.37
1981   14.740    28.60    12.03
1982   15.177    27.17    11.92
1983   12.567    21.69    11.88
1984   14.440    23.92    11.79
1985   16.557    26.49    12.12
1986   14.580    22.46    12.23
1987   14.687    22.29    12.60
1988   17.863    26.06    12.92
1989   24.160    33.68    13.68
1990   22.490    29.80    14.76
1991   21.183    26.57    15.18
1992   16.047    19.61    14.96
1993   19.340    22.89    14.69
1994   22.157    25.58    14.57
1995   31.250    35.10    14.80
1996   33.987    37.16    15.19
1997   39.233    41.63    15.86
1998   39.660    41.43    16.24
1999   37.933    38.97    16.73
2000   49.093    49.09    16.57
2001   48.480    46.74    15.59
2002   24.693    23.54    15.00
2003   28.500    26.48    14.98
2004   49.837    45.42    
More follows.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

S&P500 Index

Year, Single Year Payout Ratio, 5-Year Ratio, 10-Year Ratio

Code: Select all

1871   0.65       
1872   0.65       
1873   0.70       
1874   0.72       
1875   0.73    0.692    
1876   0.85    0.729    
1877   1.03    0.789    
1878   0.63    0.776    
1879   0.58    0.744    
1880   0.53    0.698    0.695
1881   0.55    0.629    0.677
1882   0.73    0.599    0.685
1883   0.75    0.625    0.691
1884   0.84    0.675    0.705
1885   0.99    0.755    0.730
1886   0.87    0.829    0.732
1887   0.67    0.817    0.707
1888   0.71    0.808    0.713
1889   0.87    0.812    0.738
1890   0.74    0.762    0.758
1891   0.75    0.740    0.785
1892   0.65    0.733    0.775
1893   0.67    0.724    0.765
1894   0.98    0.746    0.778
1895   1.24    0.814    0.788
1896   0.77    0.818    0.779
1897   0.82    0.864    0.795
1898   0.58    0.840    0.779
1899   0.56    0.737    0.742
1900   0.45    0.607    0.701
1901   0.63    0.588    0.687
1902   0.63    0.570    0.682
1903   0.53    0.560    0.662
1904   0.66    0.580    0.639
1905   0.62    0.611    0.609
1906   0.50    0.581    0.584
1907   0.54    0.562    0.565
1908   0.67    0.589    0.576
1909   0.68    0.594    0.587
1910   0.58    0.588    0.598
1911   0.65    0.621    0.602
1912   0.79    0.671    0.616
1913   0.69    0.675    0.632
1914   0.77    0.690    0.641
1915   0.77    0.727    0.653
1916   0.47    0.677    0.647
1917   0.38    0.565    0.615
1918   0.54    0.539    0.601
1919   0.58    0.510    0.592
1920   0.57    0.484    0.592

Code: Select all

1921   0.67    0.508    0.590
1922   1.44    0.642    0.595
1923   0.72    0.700    0.592
1924   0.54    0.694    0.571
1925   0.58    0.691    0.554
1926   0.49    0.636    0.559
1927   0.57    0.568    0.602
1928   0.69    0.572    0.623
1929   0.61    0.587    0.627
1930   0.62    0.597    0.631
1931   1.03    0.687    0.667
1932   1.34    0.791    0.687
1933   1.20    0.857    0.712
1934   0.99    0.952    0.743
1935   0.79    1.062    0.762
1936   0.62    0.953    0.782
1937   0.70    0.805    0.797
1938   0.74    0.742    0.802
1939   0.77    0.718    0.827
1940   0.67    0.699    0.842
1941   0.64    0.698    0.794
1942   0.63    0.684    0.734
1943   0.57    0.649    0.692
1944   0.65    0.632    0.673
1945   0.68    0.632    0.666
1946   0.71    0.644    0.673
1947   0.63    0.646    0.667
1948   0.51    0.631    0.641
1949   0.41    0.560    0.596
1950   0.49    0.524    0.574
1951   0.52    0.502    0.559
1952   0.58    0.503    0.556
1953   0.59    0.517    0.558
1954   0.58    0.550    0.554
1955   0.55    0.561    0.545
1956   0.46    0.542    0.524
1957   0.51    0.528    0.517
1958   0.54    0.522    0.519
1959   0.59    0.525    0.537
1960   0.55    0.526    0.542
1961   0.61    0.558    0.550
1962   0.62    0.582    0.555
1963   0.58    0.590    0.555
1964   0.56    0.584    0.554
1965   0.55    0.581    0.554
1966   0.52    0.563    0.561
1967   0.52    0.545    0.561
1968   0.55    0.539    0.560
1969   0.53    0.534    0.555
1970   0.55    0.535    0.555
1971   0.61    0.549    0.556
1972   0.54    0.553    0.549
1973   0.48    0.540    0.539
1974   0.41    0.511    0.523
1975   0.41    0.482    0.509
1976   0.45    0.455    0.502
1977   0.41    0.433    0.490
1978   0.43    0.423    0.478
1979   0.40    0.421    0.464
1980   0.38    0.413    0.446
1981   0.42    0.409    0.431
1982   0.44    0.414    0.423
1983   0.55    0.431    0.427
1984   0.49    0.448    0.434
1985   0.46    0.467    0.438
1986   0.54    0.492    0.446
1987   0.57    0.519    0.460
1988   0.50    0.509    0.467
1989   0.41    0.485    0.466
1990   0.50    0.493    0.480
1991   0.57    0.500    0.496
1992   0.76    0.527    0.523
1993   0.64    0.553    0.532
1994   0.57    0.596    0.539
1995   0.42    0.572    0.532
1996   0.41    0.529    0.514
1997   0.38    0.463    0.492
1998   0.39    0.424    0.478
1999   0.43    0.406    0.480
2000   0.34    0.387    0.458
2001   0.33    0.372    0.433
2002   0.64    0.401    0.429
2003   0.57    0.427    0.425
Have fun.

John R.
Mike
*** Veteran
Posts: 278
Joined: Sun Jul 06, 2003 4:00 am

Post by Mike »

Today's earnings support is much stronger than that of 1967. Today's dividend amounts are much more secure. There is room on the upside for dividend increases.
That's something at least. The dividend yield may be microscopic, but at least it may be more likely to keep up with inflation than it did post 67. Inflation, especially medical inflation, is the great retirement killer.
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