This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Buy the Dips: This Bull Market's Not Over

Bring on the Dividends

If you want more proof that stocks aren't expensive, look no further than dividends.

Right now, companies are paying out dividends in a big way. Not only are more firms paying dividends to shareholders, but the dividend yield of the S&P 500 is currently at the highest sustained level it's been in since the early 1990s.

>>5 Breakout Stock Trades for a Santa Claus Rally

Perhaps most important, this is all happening in the context of a near-zero interest rate environment. For the first time in more than four decades, the S&P's dividend yield is higher than the yield on five-year treasuries. So not only are stocks performing well on a capital gains basis, they're also cutting bigger income checks than fixed-income investments.

And firms are doing it all with a payout ratio that's around the historic median.

So no, stocks aren't overpriced. They're just not as absurdly dirt-cheap as they were back in 2009.

Too Far, Too Fast

If stocks aren't overpriced, couldn't they still be moving too far, too fast?

Since the market bottomed in March 2009, the S&P 500 has rallied a staggering 160%. That's certainly far, and it's certainly fast, but the new highs in stocks are sustainable.

In fact, making new highs is the stock market's normal mode. Since 1950, 60% of all S&P 500 trading days have been within 10% of an all-time high. And since 1982, 46% of all days were within 5% of an all-time high. Limited to bull markets, those numbers are even higher.

When stocks are in bull mode (as they are now), prices tend to consolidate near the highs. We just managed to forget that over the last five years of playing catch-up in stock prices.

>>Timing the Fed's Taper

High prices aren't just sustainable, they're where the market's normal mode.

A Rollover in Stock Prices?

December hasn't been kind to stocks, especially considering it's historically a great month for equity performance. But let's put things in context here: The 1.15% correction in stock prices isn't exactly the bloodbath it's been made out to be.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs