A History of the S&P 500 Dividend Yield

Dividend yields from blue-chip U.S. companies have been trending downwards over time, evidenced by the Standard & Poor's 500 Index (S&P 500) dividend yield of approximately 1.3% through the end of 2021. This is well under the index's long-run average yield of 4.3%. In fact, dividend yields have remained relatively low since 2009, when the country officially exited the Great Recession. Slowed dividend growth is one more sign that small dividends remain the new normal.

A quick review of the history of the S&P 500 reveals just how abnormal sub-3% annual yields have been. Thanks to aggressive monetary policy and the rise of technology stocks, today’s dividend investors have a bigger hill to climb than their predecessors.

Key Takeaways

  • The S&P 500 index tracks some of the largest stocks in the United States, many of which pay out a regular dividend.
  • The dividend yield of the index is the amount of total dividends earned in a year divided by the price of the index.
  • Historical dividend yields for the S&P 500 have typically ranged from between 3% to 5%.
  • Since the Great Recession, dividend yields have tended to remain below the long-run average.
History of the S&P 500 Dividend Yield

Investopedia / Sabrina Jiang

Recent and Historical Yields

During the 90 years between 1871 and 1960, the S&P 500 annual dividend yield never fell below 3%. In fact, annual dividends reached above 5% during 45 separate years over the period. The sharp change in S&P 500 dividend yield traces back to the early to mid-1990s. For example, the average dividend yield between 1970 and 1990 was 4.03%. It declined to 1.90% between 1991 and 2007. After a brief climb to 3.11% during the peak of the Great Recession of 2008, the annual S&P 500 dividend yield averaged just 1.97% between 2009 and 2019. From 2020 onward, the dividend yield fell below 2%, ranging between 1.4-1.5%.

Two major changes contributed to the collapse of dividend yields. The first was Alan Greenspan becoming chair of the Federal Reserve in 1987, a position he held until 2006. Greenspan responded to market downturns in 1987, 1991, and 2000 with sharp drops in interest rates, which drove down the equity risk premium on stocks and flooded asset markets with cheap money. Prices started climbing much faster than dividends. Despite evidence that these policies contributed to then-recent housing and financial bubbles, Greenspan’s successors effectively doubled down on his policies.

The second major change was the rise of internet-based companies in the United States, especially following Netscape’s initial public offering (IPO) in 1995. Technology stocks proved to be quintessential growth players and typically produced little or no dividends. Average dividends declined as the size of the tech sector grew.

S&P 500 Historical Dividend Yield
S&P 500 Historical Dividend Yield.

About the S&P 500 Dividend Yield

The S&P 500 is the most widely cited single gauge of large-cap equities on U.S. stock exchanges. in 2021, Standard & Poor's estimated that more than $13.5 trillion was benchmarked to the index, making it one of the most influential figures in the world of finance. To be included, a company must be publicly traded in the United States and report a market capitalization of $11.8 billion or greater.

The dividend yield for the S&P 500 is calculated by finding the weighted average of each listed company's most recently reported full-year dividend, then dividing by the current share price. Yields are published and calculated daily by Standard & Poor's and other financial media.

S&P 500 Components and Composition Changes

The composition of the S&P 500 changes throughout time. Some listed companies de-list and go private, while others merge or split into multiple companies. Listed companies might also undergo serious changes without new stock tickers emerging.

For example, Bank of America Corp. (NYSE: BAC) joined the S&P 500 in July 1976 and was given the ticker BAC. In 1998, the bank experienced severe financial distress following a default on Russian bonds. It was subsequently acquired by NationsBank, which decided to keep the more recognizable name Bank of America Corp.

Such changes make equivalent comparisons difficult to make over time. Even though the S&P 500 dividend yields from 1976 and 1999 both included reported dividends from the same ticker, BAC, the ticker represents very different companies at different points in time.

Other Considerations

All annual dividend yields are quoted in nominal terms and do not take into consideration the annual rates of inflation present over the same period. Inflation reduces the real impact of all returns, including dividends, and generally makes it more difficult to grow real wealth. Additionally, dividend yields represent absolute values, so they cannot tell you if dividend-paying stocks in the S&P 500 are superior to alternative investments.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. NASDAQ. "S&P 500 Dividend Yield by Month."

  2. Mutilpl. "S&P 500 Dividend Yield."

  3. Multipl. "S&P 500 Dividend Yield by Year."

  4. Federal Reserve History. "Alan Greenspan."

  5. Federal Reserve Bank of San Francisco. "The October '87 Crash Ten Years Later."

  6. The New York Times. "Federal Reserve Acts Warily In Combating This Recession."

  7. The Board of Governors of the Federal Reserve System. "Monetary Policy and the Housing Bubble."

  8. MarketWatch. "Netscape: The IPO that Launched an Era."

  9. S&P Global. "S&P 500."

  10. S&P Global. "S&P 500-The Gauge of the Market Economy," Page 2.

  11. Securities Exchange Commission. "Form 8-K."

Take the Next Step to Invest
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Service
Name
Description