Hello, YieldAlley readers! In this issue:

• 150 Years of Corporate America Dividend History

• Markets Rally on Domestic Strength While Global Growth Diverges

• Buffett’s $325 Billion Cash Hoard Is an Early Warning Signal

• And more!

NEWS

Standout Stories

🎶 Ringtones have proved to be an immortal business (Sherwood)

🇨🇦 Major Canadian news outlets sue OpenAI (BBC)

💰 Buffett’s $325 Billion Cash Hoard Is an Early Warning Signal (Bloomberg)

🕵 Optimists Are the Best Investors, Even If the Pessimists Sound Smarter (White Coat Investor)

🫙 The Container Store could be the next big chain to go bankrupt (CNN)

MARKET THOUGHTS

Markets Rally on Domestic Strength While Global Growth Diverges

• U.S. stocks recorded robust weekly gains:

  • S&P 500 advanced 1.7% for the week

  • Value sectors led Friday's gains, including consumer staples, financials, and industrials

  • Small-caps showed significant strength with Russell 2000 up 4% weekly

  • Global markets mixed with Japan higher but China sharply lower

• Interest rate environment:

  • 10-year Treasury yield steady at 4.4%

  • 2-year Treasury yield edged up to 4.38%

  • Markets pricing 60% probability of December rate cut

• U.S. economic indicators remain strong:

  • November composite PMI reached 31-month high

  • U.S. PMI rose to 55.3, driven by services strength

  • PCE inflation expected to rise to 2.3% from 2.1%

  • Core PCE forecast to increase to 2.8% from 2.7%

• International economic weakness:

  • Eurozone composite PMI fell to 48.1, lowest since January

  • German PMI declined to 47.3, continuing contraction

  • UK entered contraction at 49.9

  • Japan manufacturing remained weak at 49.0

• Inflation outlook:

  • Core CPI at 3.3% annually

  • Three-month annualized core CPI rose to 3.6%

  • Eurozone producer prices remain 30% higher than 2021 levels

• Forward outlook:

  • Fed likely to maintain cautious approach to 2025 rate cuts

  • Recommendation to underweight international developed stocks

  • Favor U.S. large- and mid-cap equities

  • PCE inflation data release expected Wednesday

INCOME BUILDING

150 Years of Corporate America Dividend History

The story of American corporate dividends spans an extraordinary period of growth, from mere millions in the Victorian era to over $100 billion in annual payments today. Robert Shiller's landmark dataset, tracking corporate earnings and dividends since 1871, reveals how dramatically corporate America's approach to shareholder payments has evolved.

Through three major historical crises - the Great Depression, 2008-09 financial crisis, and 2020 pandemic - dividend policies showed remarkable resilience. Most notably during the 2008 financial crisis, corporations demonstrated unprecedented commitment to shareholders when for 11 straight months, dividend payments exceeded total corporate earnings.

Today's banking sector leads dividend growth, with JPMorgan Chase increasing its dividend by 19% to $5.00 per share through December 2024. Lloyds Banking Group tops growth charts with a 21.5% increase to $0.15 per share, while Wells Fargo followed with a 14.3% boost to $1.60 per share. These increases reflect a broader trend in financial sector strength.

Consumer staples and healthcare maintain their reputation for steady increases. Starbucks raised its dividend by 7% to $2.44 per share, while Coca-Cola continued its legacy with a 5.4% increase to $1.94. In healthcare, Amgen grew its payout by 5.6% to $9.00 per share, and Becton Dickinson implemented a 9.5% increase to $4.16.

Yet these current increases mask a longer-term shift in corporate behavior. From 1871 through the early 1970s, companies typically paid out 60% of earnings as dividends. Over the past 20 years, this payout ratio dropped to 50%, then to 43% in the last decade, and has remained below 40% for the past 38 months. This decline reflects a fundamental change in how companies return capital to shareholders, with many now favoring share buybacks over dividends.

The technology sector exemplifies this evolution. While Alphabet and Meta Platforms initiated their first dividends in 2024, their yields remain below 1%, far less generous than traditional dividend payers like BlackRock ($20.40 per share) or Verizon (approximately 6.8% yield). Not all dividend stories were positive - Fidelity National Information Services cut its dividend by 30.8% to $1.44 per share, highlighting ongoing changes in corporate payout policies.

This shift from Victorian-era norms to modern capital return strategies reflects broader changes in corporate America. While dividends once represented the primary way companies shared profits with shareholders, today they're just one tool among many, with companies increasingly preferring the flexibility of buybacks over the commitment of regular dividend payments.

INCOME BUILDING

Cash Rates

Government Money Market Funds (7-Day Yields)

• SNVXX (Schwab Government Money Fund - Investor Shares): 4.33%

• SPAXX (Fidelity Government Money Market Fund): 4.47%

• TTTXX (BlackRock Liquidity Funds: Treasury Trust - Institutional Class): 4.50%

• VMFXX (Federal Money Market Fund): 4.57%

Brokered CD Rates (6-Month Rate)

• Charles Schwab: 4.45%

• E*Trade: 4.40%

• Fidelity: 4.40%

• Merrill Edge and Merrill Lynch: —

• Vanguard: 4.40%

ETFs

• SGOV (iShares 0-3 Month Treasury Bond ETF): 4.56%

• BIL (SPDR Bloomberg 1-3 Month T-Bill ETF): 4.46%

• USFR (WisdomTree Floating Rate Treasury Fund): 4.56%

• TFLO (iShares Treasury Floating Rate Bond ETF): 4.58%

BONUSES

Brokerage, Bank and Credit Card Bonuses

Brokerage Bonuses

• E*Trade (still active): Up to $4,000 in bonuses for deposits made within 60 days of enrollment. The lower deposit bonuses are also excellent, with E*Trade offering a bonus of $100 for a deposit of just $50. Offer here.

  • Use promo code PROMO24.

    • $50+ will receive $100

    • $1,000-$24,999 will receive $150

    • $25,000-$49,999 will receive $150

• tastytrade (still active): Offering up to $5,000 in bonuses. Lower deposit bonuses are attractive, with a $100 bonus for a deposit of $5,000 (2% return). Offer here.

• Robinhood (still active): Offering a 1% bonus for transferring any table brokerage holdings. No maximum, but deposits must be held for two years after account opening. Offer here.

Bank Bonuses

• BMO Harris (active) — Earn up to a $560 bonus when you open a new Smart Advantage or BMO Harris Premier checking account. Offer here.

  • Availability: Nationwide

  • Soft credit inquiry

Credit Card Bonuses

• Chase Ink Preferred (active) — Get 120,000 Ultimate Rewards bonus points when you spend $8,000 in the first three months after account opening. Offer here.

• American Express Hilton Surpass Card (active) — 150,000 points Hilton Honors points after spending $2,000 in 3 months. Get an additional 50,000 points after spending a total of $10,000 within the first 6 months. Offer here.

Picture of the Week