Why did the NASDAQ outperform the S&P and the Russell over the last decade? And why all three indexes corrected recent weeks? Dividends are part of the answer.
Between the 2009 lows and last year’s top, the S&P and the Russell rose by 500% while the NASDAQ rose three times as much, climbing 1500%.
Over this period NASDAQ 100 companies grew their earnings and their dividends by over 1300% whereas Russell and S&P dividends rose by only 160%.
So far this year dividends continue to boom, rising 20% for the Russell and the NASDAQ and about 10% for the S&P. So why have stocks been selling off? Well, investors may see recent dividend payments telling us where we have been, not where we are going.
To know where investors believe that we might be heading, look at annual dividend index futures. NASDAQ 100 Annual Dividend Index Futures price a slight fall in dividends in 2023 from 2022 and slow growth after that.
Russell 2000 Annual Dividend Index Futures price almost no growth at all for the coming decade.
And S&P 500 Annual Dividend Index Futures price a sharp drop in dividend payments next year and flat growth thereafter.
In short, rising producer prices, wages and interest rates combined with slowing growth in consumer spending and investment, appear to have made investors pessimistic about future dividend growth.
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