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"As bad as 2008 was, I consider 2009 the best year to start buying dividend stocks in nearly twenty years -- as NYU professor Aswath Damodaran recently showed, the S&P 500 dividend yield is the highest it's been since 1991!"

While the data unfortunately only goes back to 1960 I took the data from the link and plotted the Earnings Yield, Dividend Yield, and then sum of both vs. 5 year following returns (not including dividends). There is a trend of higher returns following high yield years, as expected. Unfortunately, I don't know how to post graphs, but I will assure you there is a clear trend, especially with the removal of the few 'outlier' years. 1992, 1993 & 1994 all had tremendous 5 yr returns with only modest yields.

So I believe this supports the theory that yield is important to investment outperformance.

Now the bad news.... it is clear from the S&P500 values that these are end-of-year stats, and end-of-year 2008, even being 'post-crash' as it were, still has its Earnings Yield only in the 2nd quartile, Dividend Yield in the 3rd quartile, and the sum of both in the 2nd quartile. In other words, right there in the middle. Blech...

From the graphs (and this is a very loose interpretation, you can safely ignore my conclusions) we might expect a 5 yr return of about 30% - 70%, or annualized 5%-11%, again not including dividends.

As usual I welcome your comments!
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