Tumble Sends S&P 500 Dividends to Year High Vs Treasuries: Chart

As the Standard & Poor’s 500 Index slogs through the worst start to a year since 2009, a valuation model that compares stocks and government bonds is getting stretched.

Pushed up as shares retreat, dividend yields in the benchmark equity gauge have climbed 30 basis points above the yield offered by 10-year Treasuries, the biggest advantage in a year. As recently as last week, it was government bonds that were kicking out the larger amount of annual cash.

The price difference between U.S. equity dividend yields and government bonds can serve as a proxy for a valuation comparison between the two asset classes. U.S. stocks have lost more than $1.6 trillion in market value since the start of the year, which has brought the S&P 500’s forward price-to-earnings ratio to 15.3 times, its lowest since February 2014.

Over the last year, the yield provided by U.S. 10-year Treasuries has exceeded that of S&P 500 dividends by 7.7 basis points on an average basis, according to data compiled by Bloomberg. Cash payments from stocks have yielded more than their government debt counterparts since Jan. 6, something true just 37 percent of trading days over the past year, the data show.

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