1.Stock dividends offer more yield than 30-year Treasury bond for first time since 2009
Published: Aug 28, 2019 1:41 p.m. ET
Occurred only once before in last 40-plus years: Bespoke
By William Watts
Here’s another consequence of the rally in government bonds that’s sent yields crashing around the globe — U.S. stocks now offer more yield than the 30-year U.S. Treasury bond.
As the chart below, going back to 1977, from Bespoke Investment Group highlights, the Tuesday move marked the first time since the financial crisis that the dividend yield on S&P 500 index companies SPX, +0.57% has topped the yield on the long bond TMUBMUSD30Y, -1.14%.
“The only other time in the last 40+ years where we have seen a similar inversion was for a few months in late 2008 through March 2009 (the low point of the Financial Crisis),“ Bespoke analysts wrote. “In July 2016 right after the Brexit vote, the S&P 500 dividend yield came within 0.01% of the 30-year’s yield, but it couldn’t quite make it higher.”
All in all, the higher dividend yield should make stocks more attractive.
Bespoke said it was “pretty amazing” to see how many stocks in the S&P 500 now yield more than the 5-, 10- and 30-year Treasurys. As of Tuesday, 333 stocks were yielding more than the 5-year at 1.38%; 313 more than the 10-year at 1.48%; and 256 more than the 30-year at 1.97%.
But for now, falling yields for Treasurys seems to be a negative for stocks as the yield on the 10-year note falls further below the 2-year yield, after slipping below the yield on the 3-month bill earlier this year.
Investors appear to be piling into government bonds, pushing yields down, in part out of fears of a global economic slowdown and the potential for recession as worries over an intensifying U.S.-China trade war mount. An inverted yield curve in particular is seen as a warning signal for a potential U.S. recession, albeit with a lag. Meanwhile, the yield on the 30-year bond has fallen to an all-time low below 2%, while the yield on the 10-year note ended Tuesday at its lowest since 2016, and is within hailing distance of its all-time low below 1.4%.
The S&P 500 and the Dow Jones Industrial Average DJIA, +0.83% have both pulled back more than 3% in August.
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