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Politics : Ask Michael Burke
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To: Mike M2 who wrote (66988)8/30/1999 11:54:00 PM
From: Richard Nehrboss  Read Replies (4) of 132070
 
Mike,

RE: if this market were to return to the average dividend yield of the last 70 years the market would decline 70%

I don't think you can take the dividend yield in isolation. Two factors go into the price of a stock: 1) discounted future earnings, and 2) the discounted terminal value of your investment.

Companies today often bypass dividends that are heavily taxed in exchange for activities such as share buybacks, and reinvested earnings. These increase share value and therefore the terminal value of an investment in that company.

I would therefore say that a dropping yield on the S&P paints only half the picture.

Richard
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