Here’s a remarkable chart from Harley Bassman’s end-of-year note:
The chart shows the growth in dividends paid by companies in the world’s major stock indices implied by the prices of dividend futures.
Traders are effectively betting that dividends paid by members of the S&P 500 stock index will be a little more than 30 per cent larger 10 years from now than they are today. Companies in Japan’s Nikkei 225 index are also priced to deliver larger dividends in the future than today.
The anomaly is Europe (SX5E). The green line shows the implied growth of dividends paid by companies in the Euro Stoxx 50 index. Futures prices imply these dividends will shrink by about 20 per cent over the next ten years.
If that actually happened it would represent a catastrophe for the single currency and the people of Europe. Fortunately, the prices of these dividend futures are more likely an artifact of fragmented markets than a genuine forecast of unmitigated doom.
For perspective, here is a chart of annual gross dividends per share for each of the three major stock indices, normalised to the same starting point of mid-1998:...
...MORE
For another example of why one should be wary of just accepting database output at face value see last week's "Are Market Implied Probabilities Useful?".
