Re: P/E versus MD
Posted: Tue 07 Jan 2014, 14:32:36
I don't know about earnings but dividend yield has been falling forever. Actually I know nothing about the market in general but it seems to me the corps are keeping the profits, not paying dividends and investors no longer care, they've been instructed to want to make a short term killing on the stock price instead of wanting their chosen company to actually be profitable for the long term.
http://www.financialsense.com/contribut ... dow-theory
Historically, the value of the market as a whole has been measured by comparing prices to earnings and to book value, while also considering dividend yield. Until the late-1980s, history showed that stocks were “cheap” when the market was selling near book value, with an average P/E ratio of about 10 or less, and yielding about 5% or more in dividends. Buying stocks when the market met two or more of those criteria – especially in line with key new highs in the Industrials and Transports – put the odds clearly in investors’ favor. On the other hand, investing when the market was selling at twice or more of its book value, with a P/E over 15, and yielding less than 3% was likely to bring losses. But all that started changing by the late-1980s.
market pe levels 1885 to 2013
Market P/E levels: For over 100 years until the 1990s, P/Es ranged between 5 and 25. Under the “new normal”, a P/E of 15 is cheap and God only knows what defines expensive! Source: Robert Shiller and his book Irrational Exuberance
dividend yield 1870 to 2013
Dividend yield: Meanwhile, dividend yields bounced around mostly between 3% and 8% for decades, but have remained under 3% for the last 25 years. Source: Robert Shiller and his book Irrational Exuberance
http://www.financialsense.com/contribut ... dow-theory