Tabell’s Market Letter – March 07, 1980

Tabell’s Market Letter – March 07, 1980

Tabell's Market Letter - March 07, 1980
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER New VORK STOCK eXCHANGE 'NC MEMBER AMERICAN STOCK EXCHANGE March 7, 1980 !Ve. tw.o ..w.eeksagoto. … bonds, suggesting that, assuming the continuance of a continued inflation-ary' environment such as the – recent one, these yields were, in fact, illusory. We went on to point out that, in such an environment, the anticipated yield to most investors on a 15 long-term bond might actually, in real-dollar terms, be negative. An obvious question thereby raised conCerns what, in comparison, might be the comparable yield for com- mon stocks The fOllowing table is admittedly a rather complex statistical exercise, but it attempts to answer that question as fairly as we know how. For each year from 1951 through 1979, the table shows, first, the actual dividend paid on the S & P 500, second, the Consumer PriCe Index, and third, those dividends in real-dollar terms, deflated to 1967 dollars by the CPI. The fourth column, in recognition of the fact that dividends tend to fluctuate over the short term, smooths that fluctuation by taking a five-year average of the deflated figure. The final three columns are the annual percentage rates of change in that five-year average taken over, respectively, five, ten, and twenty-year periods ending in each year. YEAR S & P 500 CONSUMER DEFLATED 5 – YEAR DIVIDENDS PRICE INDEX DIVIDENDS AVERAGE ANNUAL PERCENTAGE RATE OF CHG 5-YEAR 10-YEAR 20-YEAR 1951 1952 1. 41 1.41 79.3 80.0 S1. 78 1.7fi 1. 57 1. 68 1953 1954 1955 S1.45 1.54 1.64 80.5 80.1 80.4 S1.80 1.92 2.04 1.78 1. 85 1. 86 1956 1.74 82.7 S2.10 1.93 4.21 1957 1958 1.79 1.75 85.2 86.7 2.10 2.02 Sl.99 S2.04 3.48 2.70 1959 1.83 88.0 2.08 S2.07 2.31 1961 1962 1963 2.02 2.13 2.28 89.9 91.0 92.5 . .1 8 2.25 2.34 2.46 S 2. l-0—… 2.13 1.99 2.17 1.75 2.26 2.13 3.09 2.61 2.41 19fi4 15 2.50 2.72 93.6 95.4 2.67 2.85 S2.38 2.51 2.86 3.70 2.58 3.0fi 196fi 2.87 98.fi 2.91 2.65 4.49 3.23 1967 1968 S2.92 S3.07 101.6 10fi.4 2.87 S2.89 2.75 2.84 4.85 4.fi3 1.28 3.37 1969 1970 1971 3.1fi 3.14 3.07 112.9 119.1 123.1 2.80 2.64 2.49 S2.86 S2.82 2.74 3.7fi 2.32 0.67 3.11 3.01 2.56 2.83 1972 3.15 127.3 2.47 2.66 -0.71 2.03 2.32 1973 3.38 138.5 2.44 S2.57 -1.98 1. 28 1. 84 1974 1975 1976 1977 1978 1979 3.60 3.fi8 4.05 4.fi6 5.07 5.70 155.4 166.3 174.3 186.1 202.9 229.9 2.32 2.21 2.32 2.50 2.50 2.48 S2.47 2.39 S2.35 2.36 2.37 2.40 -2.90 -3.28 -2.98 -2.35 -1.59 -0.56 0.38 -0.52 -1.17 -1.54 -1. 78 -1.74 1. 47 1. 25 1.01 0.85 0.76 0.75 The obvious caveats must be noted. The table, of course, shows the past record, and there exists no past history of inflation at the current rate. Second, the table shows that constant-dollar dividends peaked in 1966 and have not exceeded that figure since. The five-year rate of change has been negative since 1972, and the ten-year since 1975. The twenty-year rate of change remains only marginally positive. There are, however, some positive elements. It must be remembered that the last three columns show the rate of increase or decline in the dividend stream. Since the dividends are deflated, a zero rate of change would suggest that stocks have provided a constant positive rate of return in real dollars. Even where the rate of change is negative, the real-dollar dividend return on stocks can be considered positive if the yield exceeds that rate of change. This has almost invariably been the case. There is, therefore, on the record, some justification for anticipating a positive rate of return after infla- tion from long-term common stock portfolios. Such may be the justification for the relatively better action of stocks in recent years. Dow-Jones Industrials (12 00 PM) S & P Composite (12 00 PM) Cumulative Index (3/6/80) 826.62 108.05 767.84 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTsla No llolement or el'pf(!slon of opinion or any other matter hereIn contained ', or IS to be deemed to be, directly or ind,rectly, on offer or the soliCItatIon of on offer to buy or ony security referred to or mentIoned The molter IS pre!oented merely for the of the subSCriber WhIle we belIeve the sources of our Informa- tIon to be relIable, we In no way represent or guarantee the ocnrrocy thereof nor of the statements mude herein Any actIon to be token by the subscrIber should be bosed on hIS own investIgatIon and InformatIon Janney Montgomery Scott, Inc, 05 a corporatIon, and Its offIcers or employees, may now have, or may loter take, posItIons or trades In respect to any seCUfltles ment.oned In thIS or any future Issue, and such posItIon moy be different from any vIews now or hereafter expressed In thIS or any other Inue Janney Montgomery Scali, Inc, whICh IS regIstered w.th the SEC as on Investment adVIsor, may gIve to Its Investment adVIsory and other customers Independently of any statements mode ,n thLs or In any other Issue Further informatIon on any security mentioned hereIn IS ova liable on request

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