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Quick Bite | From TINA to TIAA

August 23rd, 2023 | Article
By: Paul Zwi

High “risk free” US Treasury yields make dividend yields look pretty slim right now.  As shown below, three years ago in August 2020, the S&P’s dividend yield of 1.79% was more than 45 basis points (bps) higher than the highest yield on the Treasury curve (the 30-year at 1.33%), and every Treasury note with a duration shorter than 5 years had a yield below 0.20%. At the time, the “TINA” (There Is No Alternative) trade was in full effect.

Today it’s a different story. The S&P’s dividend yield of 1.55% is 260 bps (2.6%) lower than the lowest point on the Treasury curve right now (the 10-year at 4.15%).  The 6-month T-Bill yielding 5.49% is 4% higher than the S&P’s dividend yield.  Investors have gone from TINA to TIAA (There Is An Alternative) indeed.

Source: Bespoke Investment Group

 

It’s a similar story in Australia, although not nearly as pronounced. The yield on 10 year government bonds of 4.2% is about 30 bps higher than the dividend yield of the ASX at 3.9% (and that’s before franking credits).

 

 

 

Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770.  The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.