The S&P 500 dividend yield just hit its lowest level ever recorded.
This tells you everything about where we are in the cycle. Investors aren't buying stocks for income anymore—they're buying for price appreciation. When yields compress this much, it means either:
1) Stock prices have run so far that dividends look tiny by comparison
2) Companies are hoarding cash or buying back shares instead of paying out
3) Growth expectations are sky-high
Usually all three.
Historically, rock-bottom dividend yields have marked late-stage bull markets. Not necessarily the top, but definitely expensive territory. The last time we saw yields this compressed, valuations were stretched and forward returns weren't great.
Doesn't mean the market crashes tomorrow. But it does mean the margin of safety is thin. If you're chasing gains here, you're not getting paid to wait.
This tells you everything about where we are in the cycle. Investors aren't buying stocks for income anymore—they're buying for price appreciation. When yields compress this much, it means either:
1) Stock prices have run so far that dividends look tiny by comparison
2) Companies are hoarding cash or buying back shares instead of paying out
3) Growth expectations are sky-high
Usually all three.
Historically, rock-bottom dividend yields have marked late-stage bull markets. Not necessarily the top, but definitely expensive territory. The last time we saw yields this compressed, valuations were stretched and forward returns weren't great.
Doesn't mean the market crashes tomorrow. But it does mean the margin of safety is thin. If you're chasing gains here, you're not getting paid to wait.