Global Dividend Yield Perspective
At the end of January 2020, the dividend yield of the US market* was 1.9%. This yield is currently higher than the 10-year Treasury yield of approximately 1.5%. Figure 1 shows the dividend yield of the US since the end of December 1969. It has been hovering around the 2.0% level since mid-2002. To put this yield in context, the average dividend yield of the US since December 1969 has been 3.0%. From mid-1974 through the end of 1985, the dividend yield tended to be in the 4% to 6% range. There were times when the US dividend yield went above 6.0%. For example, at the end of March 1980, it was 6.3%. However, from April 1980 on-ward, the dividend yield has been trending downward hitting low of 1.1% at the end of December 1999. During the Great Financial Crisis, the dividend yield rose to 3.3% (at the end of February 2009) due to the Bear Market decline, but by mid - 2009 the dividend yield was back down to the 2% level. The low dividend yield of the US has been partially caused by the long running US bull market, the high proportion of technology stocks in the US market, cash being used for stock buybacks, and low interest rates.
The dividend yield of the US can be contrasted with the dividend yield in the International markets. Since February 1973, the historical average of the dividend yield of the MSCI EAFE Index (developed markets, excluding the US and Canada) has been 2.9%, similar to the US historical average of 3.0%. However, early on, the average dividend yield of the MSCI EAFE Index was weighed down by the low dividend yield of the Japanese market during its bubble years and hoarding of cash by Japanese corporations. In order to show this, Figure 2 breaks out the dividend yields of the US, Japanese**, and German*** markets. It can be seen that the Japanese dividend yield was low during much of the Japanese market bubble. Since early 2008, it has been rising. In fact, as of the end of January 2020, the Japanese dividend yield of 2.3% has surpassed the US dividend yield. Since September 1995, the German dividend yield has been higher than the US dividend yield and is 3.0%.
We expect that the low dividend yield of the overall US market will continue although there are opportunities to choose stocks with higher dividend yields than the average. Overall, we also expect that the International markets will continue to offer opportunities for higher dividend yields.
*Based on MSCI US Index
**Based on MSCI Japan Index
***Based on MSCI German Index
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