A yield that points to fully valued markets

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By Damian Reece, Head of Business


Published: 11:22PM GMT 08 Feb 2010

That’s lower than the 3.5pc achieved in the boom year of 2007. Such a low
yield would normally suggest the market thinks there will be strong dividend
growth, helping push up share price valuations.

More likely, the 3.4pc prospective yield is telling us that equity markets are
fully valued after last year’s rally – a year when earnings were under
pressure, dividends were cut and cash hoarded.

Equity valuations are hard to justify on such a modest growth in forecast
dividends, especially when you can get superior yields on bonds and property.

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