Charting the Growth Rates of the S&P 500

Political  Calculations
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Posted: Sep 24, 2012 12:01 AM

Since we referred to the growth rate of dividends per share in discussing our rather dismal outlook for 2013 yesterday, we thought we'd take look at the growth rate of trailing year dividends per share and stock prices for the S&P 500 today. We'll first look at the S&P 500's trailing year dividends per share from January 1997 through this point in mid-September 2012:

S&P 500 Trailing Year Dividends per Share, January 1997 through 13 September 2012

Looking at the trailing year data, there seems little to be concerned about for 2013, however that might change rapidly should the the currently expected lackluster quarterly dividend growth for 2013 continue much longer.

Next, let's look at the year-over-year growth rate of stock prices over the same period of time:

S&P 500 Price Dividend Growth Rate Ratio, January 1997 through 13 September 2012

As a bonus, our third chart shows the ratio between the growth rate of stock prices and the growth rate of dividends per share for the S&P 500 from January 1997 through mid-September 2012:

S&P 500 Year-Over-Year Stock Price Growth Rate, January 1997 through 13 September 2012

The reason this chart is a bonus is because we've found that the price dividend growth ratio is a key measure of the level of distress in the stock market (or the economy) at any given time. In fact, whenever the ratio spikes (hits a relative peak), we can expect stock prices will trough (hit a relative bottom) within a two month long window of the spike some 81.1% of the time (it's basically a given for a three month long window of time). Or at least that's what's happened according to the all the data we have going back to January 1871!

Make of this what you will: At present, the price dividend growth rate ratio is rising....