Ed_The_Gypsy
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This is interesting!Quote:
Originally Posted by Ed_The_Gypsy
Dividends will continue. Just like in the Great Depression. You do own stocks that pay dividends, don't you?
I keep seeing stuff like this, finally have to butt in refute this (at least to a certain extent). According to Value Line data, the DOW stocks had $12.8 in dividends in 1929. This dropped to $11.1 in 1930, $8.4 in 1931, $4.6 in 1932, and $3.4 in 1933. It wasn't until 1949 when dividends on the dow stocks returned to 1929 levels. In percentage terms, almost three quarters (73.4%) of the dividends were lost by 1933.
I own lot's of dividend stocks, but please don't believe that the dividends are sacrosanct.
(In comparison, the dow stocks earnings went from $19.9 in 1929 to a low of -0.5 in 1932, while book value didn't have nearly the same drop... $91.3 in 1929, $80.5 in 1933.)
So, earnings declined steeply, as did the stocks themselves (share prices). The 30 Dow stocks paid out 56% of earnings as dividends in 1929, but went on to pay out dividends without earnings to support them in 1932. And in 1929, dividends were paid at the rate of 14% of book values that year? That seems odd to me. It seems high. What is it today?
Then in the doomsday scenario, stock prices decline to 'nothing', and so do dividends. But book value might go down only 12%.
I wonder how the broader market behaved over the same time? The Dow is just 30 stocks. The broader market was much smaller then, I know.
I do miss the significance of book value to those of us in the deep doo-doo. We can't sell at book value; we can only sell for what the market will pay. This is from the perspective of having to live off one's investments.