Deutsche Bank expects bank payouts (both dividends and buybacks) to rise from 27% to 43% on an average, taking the total yield on bank stocks from 2% to 4.3%.
That is one of the ways in which increasing a tax rate can reduce the total tax yield, thereby defeating the whole supposed object of the tax-raising exercise.
You add the dividend yield to your stock price increase to produce a total return that incorporates both the stocks yield and its capital appreciation.
The latter part of that statement highlights the issue with seeking yield (versus total return) in today's environment.
But first, let's take a step back and ask why one is focusing on yield rather than total return.
Traditionally, dividends provided a significant part of investors' total return, even when the dividend yield was only 4-5%.
The Vanguard Total Bond Market Index Fund has a yield to maturity of 1.6%, scarcely enough to keep up with inflation.
When you add earnings growth to the meager dividend yield, you get a total real return not much better than 3.5%.
As markets sit out the summer in the hope of a more active final three months of 2012, LCD has analysed high-yield performance in terms of total return and price movement.
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By contrast, high-yield stocks have trailed the total return of the overall market more recently, returning 6.4% annualized from the beginning of 2003 to the end of 2011, versus 7.26% for the overall market.
The WisdomTree Japan Total Dividend Index ( DXJ) has a current yield of 1.85%, trades an average of 176, 000 per day, and has an expense ratio of 0.48%.
The best performing investors on Marketocracy.com have been loading up on yield stocks in an attempt to ensure respectable total returns in this sideways market.
If you consider that every possible transaction in the economy is arbitraged against the Treasury yield curve, it is clear that paying banks above the Treasury yield curve to hold reserves will depress both total demand and bank lending.
With a target of 8% organic production growth, this is a stock where the bulk of the total return may in fact come from stock gains rather than dividend yield.
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The health care sector has the highest overall average dividend yield performance as the sector boasts a current yield of 4.59 percent and year-to-date total return performance of 17.4 percent.
At a forward PE of 11.6 and an expected dividend yield of 1.9%, these shares are poised for strong total returns over the next 3-5 years.
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Just take a look at what happened to the SPDR Barclays High Yield bond ETF ( JNK) compared to the high-quality Vanguard Total Bond ETF ( BND) during the heart of the last recession.
If over the next year the yield on long Treasurys climbs four percentage points from where it is now, your total return on such paper will be -40%.
No one is sure of the total subsidy but, as a guide, BNDES lends at about 6%, well below the yield on ten-year government bonds of 12%.
We also continue to own some traditional bonds funds, such as PIMCO Total Return Fund, in addition to other income-oriented investment vehicles such as the Nuveen High Yield Bond Fund, which yields more than 7%.
Furthermore, the Bank of America Merrill Lynch high-yield indices in the U.S. and in Europe confirm this pattern: the total return in the year to date stands at 9.28% in the U.S., versus 12.76% in Europe.
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Most students of economics are familiar with the Laffer curve, named by Dr. Art Laffer, which demonstrates how higher taxes do not necessarily mean a higher tax yield, with there being a point (the peak of his curve) after which total revenue falls when the tax rate increases.
As for Exelon, it pays a higher dividend yield of 4.8%, with its stock producing year-to-date a total return of 9%.
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In coming up with its dividend-stock list, UBS looked for companies that had a market capitalization of more than 4 billion euros, a dividend yield above the European projected forward 12-month dividend yield of 4.5% and cash on books of 5% or more as a percentage of total assets.
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