As stocks fluctuate from "overvalued" to "undervalued" due to stock market or internal cycles, the dividend yield also fluctuates between excessively rich and excessively meager.
Stock market strength and a higher 30-Year bond yield have pushed down equity valuations.
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Because of stock market strength and a higher 30-Year bond yield, equity valuations are less undervalued and more overvalued.
Let me give you some simple math: The dividend yield on the U.S. stock market is 1.5%.
For the stock market, returning to equilibrium could mean a cash dividend yield of around 4%, the average over 80 years.
The high-yield bond market is returning as much as most stock markets anywhere.
All three pay a yield of about 3%, reflecting in part the recent stock market swoon.
MetLife sells as if 10 year Treasuries will yield 2 percent for the next 5 years, that the stock market withers below 1000 and variable annuity sales dry up.
Like the stock market, trading in U.S. Treasuries was placid, as the yield on the benchmark 10-year U.S. Treasury note, which moves opposite to its price, rose slightly to close at 2.19%, from 2.18% Tuesday.
After being down several days in a row, the stock market got a lift Friday from European rumors that the ECB is considering setting yield-band targets in a new bond-buying program to help contain borrowing costs for Greece, Spain, and Italy, and the release of a letter Fed Chairman Bernanke had sent out a few days earlier.
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And it is for this reason that the stock market has not had an equally violent reaction to the 45% increase in the yield on the 10-year T-Note.
The high yield market rose over 4 percent during October, returning more than the stock market year to date.
Our 2013 Market Outlook provides a diversified 24-stock portfolio of attractively-priced stocks, while the average yield of the group stands at 3.5%, well above the sub-2% yield on the 10-year Treasury, and even more than the 30-year!
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Much of this money creation is going into stock prices, since at near-zero interest rates bonds yield little and bank savings or money-market accounts almost nothing at all.
Colgate also has the added benefit of being a defensive stock in case the autumn broad market rally cools, in addition to a decent 2.8 percent annual dividend yield to fall back on.
In coming up with its dividend-stock list, UBS looked for companies that had a market capitalization of more than 4 billion euros, a dividend yield above the European projected forward 12-month dividend yield of 4.5% and cash on books of 5% or more as a percentage of total assets.
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