Thursday, August 29, 2019
US company dividends now outstrip Treasury yields
Even though we just a saw an inverted yield curve a few days ago, income-hungry investors are being driven into stocks. As yields on US Treasury bonds decline investors are now getting more income from dividends on S&P 500 shares, this has resulted in driving more savers towards the stock market. As we look at the possibility of a recession on our horizons, investors must look back to the 2008 financial crisis to discover the last time dividends brought in more cash than all other available treasuries . As companies aim to increase their dividends each year even in times of stress, I'm curious to see what will happen if the theory of inverted yield curves holds true, and rumors of a recession become real.
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I think this is an interesting point. I really hope that investors learn from what occurred during 2008 and make better decisions this time around. All of this talk of a recession is overwhelming at times, I think it gives companies a much needed "wake up call" if you will. Now that everyone has seen the inverted yield curve, they all have to make better decision right now to not allow a recession to happen in the first place.
ReplyDeleteFeeding off what Jaret said, I think it's extremely crucial for investors to always be thinking about the possibility of a major market selloff when putting their money into stocks compared to bonds - like what happened in the 2008 financial crisis. The situation is that dividends are riskier than bonds because bonds are backed by an issuer, while issuers for dividends have no requirement to pay the shareholders. This being said, if there ultimately is a recession there would be a greater deal of loss if investors have more dividends from S&P shares compared to US Treasury bonds.
ReplyDeleteI think it will definitely be interesting to see what happens because despite knowing the inverted yield curves often point to a recession Esther George is pretty confident that there will not be a recession any time soon.
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