10-09-2021, 10:56 AM
If you compare the earnings/dividend yields to the rate of inflation, it is evident
<!-- SC_OFF --><div class="md"><p>The earnings yield of the SP500 is about 3%, meanwhile the dividend yield of the same index is 1.35%. This tells us that for every $100 that is invested in the SP500, $3 in profit will be earned by the company and $1.35 will be passed over to the shareholder as a dividend.</p> <p>However, unfortunately, inflation is currently on pace to hit 5%-6% by the end of the year, and we may very well maintain some level of higher than norm inflation next year. This means that the $100 that was invested into the index is now worth only ~$95 in real dollars. To recoup the money you lost you will need to earn a 6%-7% dividend yield. Alternatively you will need the earnings yield to approach 8%-9%. In order to get these yields the share price has to tank considerably.</p> <p>Then there is the effect inflation has on expenses, revenue and profits. </p> <p>See you on the other side folks.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/thecrazednutter"> /u/thecrazednutter </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/q4ap48/if_you_compare_the_earningsdividend_yields_to_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/q4ap48/if_you_compare_the_earningsdividend_yields_to_the/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>The earnings yield of the SP500 is about 3%, meanwhile the dividend yield of the same index is 1.35%. This tells us that for every $100 that is invested in the SP500, $3 in profit will be earned by the company and $1.35 will be passed over to the shareholder as a dividend.</p> <p>However, unfortunately, inflation is currently on pace to hit 5%-6% by the end of the year, and we may very well maintain some level of higher than norm inflation next year. This means that the $100 that was invested into the index is now worth only ~$95 in real dollars. To recoup the money you lost you will need to earn a 6%-7% dividend yield. Alternatively you will need the earnings yield to approach 8%-9%. In order to get these yields the share price has to tank considerably.</p> <p>Then there is the effect inflation has on expenses, revenue and profits. </p> <p>See you on the other side folks.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/thecrazednutter"> /u/thecrazednutter </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/q4ap48/if_you_compare_the_earningsdividend_yields_to_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/q4ap48/if_you_compare_the_earningsdividend_yields_to_the/">[comments]</a></span>Kind Regards R