The S&P 500 dividend yield has now fallen to just above 1.1%, the lowest level since 2000 — and that carries powerful implications.
1. Valuations Are Stretched
A falling dividend yield isn’t just a function of rising prices — it’s a sign that equity valuations are near historic extremes. The last time yields were this low, markets were priced for perfection, leaving little margin for earnings disappointments or tightening financial conditions.
2. Income vs. Risk
With Treasuries and money market funds offering yields well above 4%, investors are now taking equity risk for less income than ever. The opportunity cost of holding stocks purely for yield has rarely been higher — a stark reversal from the post-2008 “TINA” (There Is No Alternative) era.
3. Historical Context
Each prior trough in dividend yields — late 1960s, 1999–2000, and 2021 — preceded periods of equity underperformance or valuation resets. While the market could continue to defy gravity, history suggests that such low yields often mark late-cycle optimism.
Bottom line:
The S&P 500’s dividend yield may look like a small number — but it tells a big story: income is back in bonds, and equity valuations are running thin on cushion.
Note: the above graph excludes dividends.