Stock Market Briefing: Trend Lines for Profits & Dividends November 28, 2016 Dr. Edward Yardeni 516-972-7683 eyardeni@ Joe Abbott 732-497-5306 jabbott@ Please visit our sites at blog. thinking outside the box
Table Of Contents Table Of Contents S&P 500 Index Price Growth Paths 1 Earnings & Revenues 2 Profits 3-4 Dividends 5 November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
S&P 500 Index Price Growth Paths 6004 5004 4004 3004 2004 Figure 1. S&P 500 INDEX PRICE WITH 4% TO CAGR GROWTH PATHS (base period Dec 1920 = 7.11, ratio scale) Oct 6004 5004 4004 3004 2004 1004 S&P 500 (2143.02) 6% 1004 4% 4 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 4 Standard & Poor s Corporation. 4050 3550 3050 2550 2050 Figure 2. S&P 500 STOCK PRICE INDEX WITH 4%- CAGR GROWTH PATHS (base period Dec 1959 = 59.06, ratio scale) Oct 4050 3550 3050 2550 2050 1550 1550 1050 S&P 500 (2143.02) 6% 1050 550 550 4% 50 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 50 Source: Standard & Poor s. Page 1 / November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
210 185 160 135 Figure 3. Earnings & Revenues S&P 500 ACTUAL & FORWARD EARNINGS & REVENUES (ratio scale) 11/17 210 185 160 135 110 110 85 85 60 60 35 10 Forward Earnings* (130.9) Forward Revenues* Divided by 10 (121.4) S&P 500 Trailing 4-Quarter Operating EPS (117.3) Growth Rate** 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 35 10 * Time-weighted average of consensus estimates for current and next year. Monthly through April 1994, then weekly. ** Compounded monthly to yield annually. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Thomson Reuters I/B/E/S. 230 205 180 155 Figure 4. S&P 500 ACTUAL & FORWARD REVENUES (ratio scale) 230 205 180 155 130 105 11/17 Q3 130 105 80 55 Actual Revenues Divided by 10 (quarterly, annualized, nsa) (116.3) Forward Revenues* Divided by 10 (121.4) Growth Rate** 80 55 30 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 30 * Time-weighted average of consensus estimates for current and next year. Monthly through April 1994, then weekly. ** Compounded monthly to yield annually. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Thomson Reuters I/B/E/S. Page 2 / November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
6375 5675 4975 4275 3575 2875 Figure 5. Profits NOMINAL GNP & AFTER-TAX CORPORATE PROFITS (1960=100, ratio scale) Q2 6375 5675 4975 4275 3575 2875 2175 2175 1475 1475 775 775 Growth Path* Nominal GNP After-Tax Corporate Profits Reported to IRS From Current Production** 75 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 75 * Compounded monthly to yield annually. ** Including Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj), which restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. Source: US Department of Commerce, Bureau of Economic Analysis. 183 153 123 93 Figure 6. S&P 500 EARNINGS PER SHARE (dollars, ratio scale) Nov Q3 183 153 123 93 63 S&P 500 Earnings Per Share* Reported (4-quarter sum) 63 33 Operating** (4-quarter sum) 33 Forward*** 3 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 3 * Growth paths are compounded monthly to yield and annually. ** Excludes write-offs. *** S&P 500 12-month forward consensus expected operating earnings per share. Time-weighted average of consensus earnings estimates for current and next year. Source: Standard & Poor s Corporation and Thomson Reuters I/B/E/S. Page 3 / November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
Profits 6375 5675 4975 4275 3575 Figure 7. NOMINAL GDP & AFTER-TAX CORPORATE PROFITS (1960=100, ratio scale) Q2 6375 5675 4975 4275 3575 2875 2875 2175 2175 1475 1475 775 775 Growth Path* After-Tax Corporate Profits Reported to IRS From Current Production** 75 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 75 * Compounded monthly to yield annually. ** Including Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj), which restate the historical cost basis used in profits tax accounting for inventory withdrawals and depreciation to the current cost measures used in GDP. Source: US Department of Commerce, Bureau of Economic Analysis. 220 190 160 130 Figure 8. S&P 500 FORWARD EARNINGS* & Growth Trend (ratio scale) 11/17 220 190 160 130 100 S&P 500 Forward Earnings (130.9) 100 Trend** 70 70 40 40 10 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 10 * 52-week forward consensus expected S&P 500 operating earnings per share. Monthly through April 1994, then weekly. ** Compounded monthly to yield annually. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Thomson Reuters I/B/E/S. Page 4 / November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
Dividends 250.7 200.7 150.7 Figure 9. S&P 500 TRAILING 4-QUARTER DIVIDENDS WITH TO 8% CAGR GROWTH PATHS (base period Dec 1946 = 0.71, ratio scale) 250.7 200.7 150.7 100.7 100.7 50.7 8% Q3 50.7 6%.7 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20.7 Standard & Poor s Corporation. 251.5 201.5 151.5 Figure 10. S&P 500 TRAILING 4-QUARTER DIVIDENDS WITH TO 8% CAGR GROWTH PATHS (base period Dec 1959 = 1.83, ratio scale) 251.5 201.5 151.5 101.5 101.5 8% 51.5 Q3 51.5 6% 1.5 60 65 70 75 80 85 90 95 00 05 10 15 20 1.5 Standard & Poor s Corporation. Page 5 / November 28, 2016 / Stock Market Briefing: Trend Lines for Profits & Dividends
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