Summary
Since 2009, the dividend yield on the S&P 500 Index has stayed between 1.8 and 2.2 percent until recently.
As of Friday’s close, the dividend yield on the index was 2.31 percent, which suggests that stock prices should go up to bring the yield back into the range.
Even if we assume that the range should be moved up based on recent Federal Reserve action, we would still have a range of 2.0 to 2.4 percent.
Under this new range, the midpoint would be 2.2 percent, suggesting that 2.31 percent is an attractive entry point.
This is confirmed by the fact that the dividend yield on the index is now higher than the yield on 10-year treasuries.
