Weekly Chartology With A Focus On Dividends And Goldman's 2012 Unchanged Target

In this twofer of a chartology packet, we take a look at Goldman's target for 2012, which David Kostin has as unchanged for the time being (unlike Morgan Stanley which went bearish off the bat), as well as what one should expected from dividend stocks. First, regarding Goldman's 2012 target of 1250 on the S&P, or unchanged from last year, "S&P 500 finished 2011 flat in price terms and outperformed most global indices. We see similar returns in 2012 with a 12-month target of 1250. Recent strength in US economic data and less negative news from the Eurozone and Washington, DC is unlikely to be sustained, implying near-term multiple risk as investor confidence falters. During 4Q, analysts cut 2012 EPS estimates in all sectors. We forecast downside to US equities during 1H." So where should cash be parked according to Goldie? Why in the ever bigger dividend bubble: "Dividends accounted for 20% of the 7.2% annualized total return to US stocks since 1950, 40% of the 1.6% average total return during the past decade, and 100% of the total return last year. We forecast 2012 S&P 500 dividends per share will establish a new record high of $29.20, exceeding the prior peak reached in 2008. Dividend swap market implies similar dividend growth in 2012 compared with our forecast, but lower growth from 2013 through 2021. We expect 23% and 15% dividend growth for Information Technology and Financials, respectively." Incidentally, dividend parking makes sense in this environment of devaluing global cash: as capital appreciation becomes next to impossible with multiples contracting ever more and with earnings rolling over, the only way to generate an ROI is to extract as much cash from companies as possible...Of course assuming management will be willing to part with its cash buffer in light of increasing uncertainty. Net net this also means a decline in stock prices (ex-dividend) but who's counting.

So here is Goldman's weekly chartology.

And its forecast for the new year.

Comments

[ebworthen]

Wow, those mutual funds got hammered in 2011.

Most of the big retail funds were at a loss, no wonder people are putting their money in TIPS, PM's, or just going to cash.

The sector charts and "GARP" quadrants are worth a look, though I see Chipotle, Google, and some other overheated names in there.

Thanks Tyler, worth the read, and nice to know what the squid is thinking (at least on some level).

[Meremortal]

Looking at these charts, reading the copy and looking forward to QE3 this summer (how else can Obama be saved?) the first answer I get is NLY.

Now to find some similiar additions...

[I should be working]

I would like NLY more if I understood the first thing about their business model.  Aren't companies like that highly leveraged and require people to refinance to keep up profits?  Both of which are a big bet that interest rates never return to more normal levels and that the US government continues to be the buyer of last resort for MBS.

[There is No Spoon]

NLY model: borrow short, lend long, leverage 7 to 1. They cut their dividend recently due to lower long term mortgage rates hurting their carry. As long as there is ZIRP they will get some carry, but less with a flatter curve. If the Fed decides to buy MBS the mortgage rates will likely increase just as treasury yields increased during QE. Refinancing hurts their profits.

[I should be working]

So if ZIRP ever end and the interest rate curve inverts or compresses they are screwed. No thanks I think I'll keep my money elseware.

[I should be working]

Calling it a dividend bubble is a little over the top.  I think it's a great sign that investors are voting with their feet and forcing companies that have gotten used to paying nothing back to raise their dividends.  If payout ratios were higher US equities would look so much more attractive.  Call me crazy, but a lot of European stocks look pretty good right now.  By and large their payout ratios are considerably higher.

[rocker]

In my opionion I believe the thought is that the stocks that carry the dividends are in a bubble. The herd is all in. 

[earleflorida]

dividend payouts = massive layoffs

[NOTW777]

"less negative news" from DC?  what?  isnt the dictator still in control running roughshod over the constitution

[Yen Cross]

 I have " Thoroughly" , worked that Marketing Letter<

[Stax Edwards]

I agree with Squiddy in that dividends will remain a priority for retail for the forseeable future.  Suggestion of a bubble is ridiculous at this point (not much upside left in Utilities though).  Valuations remain attractive, and for the buy and hold crowd getting paid a nice yield while you wait is a tempting proposition in a zirp enviro. 

Selling physical silver is where it is at right now though, IMO.  Emptied out all our silverware drawers today and took em down to the smelter.  We are going to use plastic utencils for the next couple months and then buy new silverware once the price goes down in March or April

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