Dividend Yields on Corporate Equities Drop in 2005

The Federal Reserve national flow of funds accounts (Tables F102 and L102) show that current yields for cash dividends on U.S. corporate equities fell significantly in 2005.

The current yield for the entire market is calculated by comparing the Federal Reserve’s figure for total market value of corporate equities to total disbursements on cash dividends.

The graph shows that the downtrend in dividend yields was constant throughout 2005.

Dividend Yield on US Stocks
Dividend Yield on US Stocks

Between Q4 2004 and Q4 2005, average dividend yields fell from 4.2% to 1.5%, while long bond rates held steady or rose slightly.

The decline in dividend yield was due primarily to a sharp reduction in amounts paid as dividends, rather than to an increase in the market value of equities.

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