No. of Recommendations: 5
So the recent trend of rising net profit margins will end at some point and, even if they stay at their peak, profits would grow no faster than sales thereafter. S&P 500 real sales have risen 1.57%/year in the last 25 years and 2.48%/year in the last 15. You get dividends on top of those capital value growth rates, but since prices are so high the yields are low: 1.14% at the moment, and that's well above long term trends.
Sobering numbers.
If we call that 2% growth in real sales, plus 2% inflation, plus 1% divis, that's 5% / year total return (nominal). Some way off the 10%+ that many expect. And a rise in divi yield (i.e. fall in the indexes) could easily wipe out a few years of that 5%, say there's a 30% drop and that's no gain in 6 years.
Hmmm ... :-(
SA
