Condition A: Investment A: 3.5 % initial yield with an 8 % per
year nominal growth rate.
Condition C: Investment A: 3.5 % initial yield with an 8 % per
year nominal growth rate.
Condition B: Investment A: 3.5 % initial yield with a 10 % per
year nominal growth rate.
Investment A: 3.5 % initial yield with a 10 % per
year nominal growth rate.
Condition E: Investment A: 3.5 % initial yield with a 10 % per
year nominal growth rate.
Here is a summary: Investment A: 3.5 % initial yield with an 8 % per
year nominal growth rate.
Investment A: 3.5 % initial yield with an 8 % per
year nominal growth rate.
Here are my findings: Investment A: 3.5 % initial yield with an 8 % per
year nominal growth rate.
Not exact matches
«A decrease in
nominal GDP
growth resulting solely from a one -
year, 1 - percentage - point decrease in the
rate of GDP inflation» reduces the budgetary balance by $ 1.9 billion.
While stocks have a terminal value beyond a 10 -
year period, the effects of interest
rates and
nominal growth on those projections largely cancel out because higher
nominal GDP
growth over a given 10 -
year horizon is correlated with both higher interest
rates and generally lower market valuations at the end of that period.
At longer horizons, the 6.3 %
growth rate that we've assumed for
nominal GDP over the coming
years will begin to bail investors out given enough time, and as a result, our projection for 10 -
year S&P 500
nominal total returns peeks its head up above zero, at about 2.4 % annually from current levels.
Most importantly, with
nominal GDP
growth rates having dropped from 20 % to 8 - 9 % the greatest of all the distortions, the interest
rate distortion, has been the one most dramatically to adjust in the past three
years.
For many
years nominal GDP
growth in China was 18 - 21 % and the official lending
rate was around 7 %.
At a federal - provincial finance ministers» meeting in December 2012, the Finance Minister announced that, starting in 2017 - 18, the
rate of
growth in the Canada Health Transfer (CHT) would be reduced from 6 per cent per
year to grow in line with a three -
year moving average in
nominal GDP, with a funding guarantee to grow by at least three per cent per
year.
While there are some signs of recognition such as the Fed's reduction in its estimated neutral
rate from 4.5 percent to 3.0 percent during the last 2
years, the IMF's explicit use of the term secular stagnation in its World Economic Outlook, ECB president Mario Draghi's call for global coordination and greater use of fiscal policy, and Japan's indicated interest in fiscal - monetary cooperation, policymakers still have not made sufficiently radical adjustments in their world view to reflect this new reality of a world where generating adequate
nominal GDP
growth is likely to be the primary macroeconomic policy challenge for the next decade.
In the 2006 Budget, the government promised to reduce the deficit by $ 3 billion per
year; to reduce the federal debt - to - GDP ratio to 25 per cent by 2012 - 13; to eliminate the total government sector debt (which includes the federal, provincial and local governments as well as the Canada and Quebec pension plans) by 2021; and finally, to keep the
growth in program expenses below the
rate of
growth in
nominal GDP.
Even if the
growth rates of
nominal GDP and U.S. corporate revenues (including foreign revenues) over the coming 20
years match their 4 %
growth rate of the past 20
years, and even if the most reliable valuation measures merely touch their historical norms 20
years from today, the S&P 500 Index two decades from now will trade more than 20 % lower than where it trades today.
Historically, those interest
rate and
nominal growth effects have largely offset, which is why Market Cap / GVA has been reliably correlated with actual 10 -
year S&P 500
nominal total returns regardless of the prevailing level of interest
rates.
The private sector economists are surveyed for only a selective number of aggregate economic and financial indicators: real gross domestic product (GDP)
growth; GDP inflation,
nominal GDP;, the 3 - month treasury bill
rate;, the 10 -
year government bond
rate;, the unemployment
rate; the, consumer price index; the exchange
rate (US cents / Cdn $); and finally, and U.S. real GDP
growth.
If I assume a dividend
growth rate of 6 percent (about the long - run average *), the current S&P 500 dividend yield of 2.1 percent (from multpl.com), a terminal S&P 500 dividend yield of 4 percent (Hussman says that the dividend yield on stocks has historically averaged about 4 percent), the expected
nominal return over ten
years is 2.4 percent annually.
Looking back over the past 60
years, the level of
nominal growth has been the key to understanding the level of
rates.
During the «Great Moderation» (1987 — 2006), under Fed chairman Alan Greenspan, the trend
rate of
growth of final demand, as measured by
nominal final sales to domestic purchasers (FSDP), was 5.4 percent per
year — split into real
growth of 3 percent and inflation of 2.4 percent.
The data is unambiguous on current economic conditions - GDP
growth in the last quarter of 2015 was a meager 2.11 % with full
year growth of 2.79 % according to the National Bureau of Statistics (NBS); inflation rose sharply to 11.4 % in February with prospects of reaching 12 % by March; capital markets have remained bearish; according to UNCTAD Nigeria's FDI fell by 27.7 % to $ 3.4 billion in 2015, and on current trends may fall even more precipitously in 2016; the de facto exchange
rate of the Naira for most producers and consumers is now N322 / $ even though CBN maintains a
nominal N197 / $ for privileged persons; several economic sectors - construction, government, manufacturing, oil and gas and hotels and restaurants are in recession or barely out of it; government's official foreign reserves is down to $ 27.8 bn; and unemployment and under - employment
rates have worsened 10.4 % and 18.7 % by the end of 2015.
According to Nielsen Bookscan, sales were up 1.65 % in the first quarter of 2015, but this can only be seen as
nominal growth as the official inflation
rate was pegged at 6.41 % last
year, the market size actually decreased when compared to 2014.
From the equation, we can see that the annualized dividend
growth rate is 6.75 % per
year (
nominal).
The formula for the real income of an investment at
year N is: Inflation adjusted dividend income = (initial dividend amount) * -LCB-[1 + (
nominal dividend
growth rate)-RSB- ^ N -RCB- / -LCB-[1 + (inflation
rate)-RSB- ^ N -RCB- Typically, you would use a
nominal dividend
growth rate of 5.5 % per
year in the absence of other information and 3 % per
year inflation.
I collected additional data with initial dividend yields of 3 %, 4 % and 5 % and
nominal dividend
growth rates of 6 %, 8 % and 10 % per
year.
It is more accurate to argue that following poor 10 -
year returns, provided that valuations are depressed based on normalized earnings and the economy is likely to grow at double digits
rates of
nominal growth - investors can probably anticipate higher subsequent long - term returns.
It has had a remarkably stable
NOMINAL dividend
growth rate of 5 % per
year since the 1950s (actually, since the 1940s).
If the initial dividend yield is 4 % and the
nominal dividend
growth rate is 5 % per year AND if the Stock A allocation is 80 % and the TIPS allocation is 20 %, the Continuing Withdrawal Rate is 4.9
rate is 5 % per
year AND if the Stock A allocation is 80 % and the TIPS allocation is 20 %, the Continuing Withdrawal
Rate is 4.9
Rate is 4.95 %.
It retains the S&P 500's 5 % per
year nominal dividend
growth rate.
As a reference, the S&P 500 dividend
growth rate is 5 % per
year (annualized,
nominal).
It should be straightforward to match the 5 % per
year nominal dividend
growth rate of the S&P 500.
Since 1950 (actually, since the 1940s), S&P 500 dividends have had a remarkably steady
nominal growth rate of 5 % per
year.
If I assume a dividend
growth rate of 6 percent (about the long - run average *), the current S&P 500 dividend yield of 2.1 percent (from multpl.com), a terminal S&P 500 dividend yield of 4 percent (Hussman says that the dividend yield on stocks has historically averaged about 4 percent), the expected
nominal return over ten
years is 2.4 percent annually.
Stock A has a 5 % per
year (annualized,
nominal)
growth rate.
Notice that Stock A has an 8 % per
year (
nominal) dividend
growth rate.
During the past century, the average
rate of inflation was 3.3 percent per
year, reducing the
nominal 5 percent earnings
growth rate to a real
growth rate of just 1.7 percent.
I took the investments from Taken At Face Value, Condition A. Investment A has a 3.5 % initial yield and an 8 % per
year nominal dividend
growth rate.
Investment B has a 6.1 % initial yield and a 2 % per
year nominal dividend
growth rate.
This time I took the investments from Taken At Face Value, Condition A. Investment A has a 3.5 % initial yield and an 8 % per
year nominal dividend
growth rate.
Dividend
Growth to the Rescue Since inflation averages around 3.0 % per year, the required nominal dividend growth rates are 4.0 % and
Growth to the Rescue Since inflation averages around 3.0 % per
year, the required
nominal dividend
growth rates are 4.0 % and
growth rates are 4.0 % and 5.5 %.
I allocated $ 50000 to dividend stocks with an initial dividend yield of 3.5 % and a
nominal dividend
growth rate of 5 % per
year.
I assign it a
growth rate of 5.5 % per
year nominal.