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Home Publications Blogs Beat the Press Doesn't GE Stock Pay a Dividend?

Doesn't GE Stock Pay a Dividend?

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Monday, 13 December 2010 07:55
I happened to notice Matt Kranz's calculations in USA Today of what someone would have earned owning shares of GE stock since 1970. The calculations don't adjust for inflation, which means that no one can assess what their real return would have been. Perhaps even more striking is the fact that the calculation does not include dividend payouts. Typically close to half of the real return on a stock will be in the form of dividend payouts.
Comments (6)Add Comment
Mr Whose Your Nanny Ignores Law of Large Numbers
written by izzatzo, December 13, 2010 8:31
Mocking Matt Kranz for a miscalculation of return on GE stock is like picking out one snowflake and insisting it represents all the other snowflakes.

Even if Kranz is an outliar, the truth lies in measures of central tendency among all outliars and inliars taken together. A flake is a flake, but only in context.

That's how markets work, including information reported about markets. The truth of large numbers ultimately crowds out mistakes by definition.

Stupid liberals.
most finance deals in nominal returns
written by pete, December 13, 2010 10:22
Since CPI inflation affects the real return on all assets, it does not aid in considering alternative investments (bonds v. stocks and so forth). Anyway, add 2% dividends or so to the 7%. Not a big deal. Calm down.
...
written by kharris, December 13, 2010 12:18
Lemme see. So one comment comes down to "Don't criticize Krantz because if we pretend that he is nothing more than a datum that we are plugging into a notional statistical model, and assume that errors among pundits are normally distributed along some continuum that we don't need to name, then Krantz errors should not be written about so shut up you stupid liberal.

The other is that Krantz leaving out dividends isn't a big deal because you can add them back in - ignoring the point that dividends on average account for half of returns. So don't write about Krantz. No mention of your political sins.

Seriously, DB, you need a better class of sniping in your comment section.
Half the real return "typically" comes over forty-years?
written by CMike, December 13, 2010 12:33
Dr. Baker writes:

The calculations don't adjust for inflation, which means that no one can assess what their real return would have been. Perhaps even more striking is the fact that the calculation does not include dividend payouts. Typically close to half of the real return on a stock will be in the form of dividend payouts.

Perhaps I don't understand what is meant by "the real return" but I thought the price of a stock was supposed to be the estimated present value of all future dividends given the anticipated real interest rates.

Here's a comment along those lines by Brad DeLong:
Now when the stock market's dividend yield is 3%, fully 75% of the present value of stocks comes from dividends that are to be paid more than a decade hence.


http://delong.typepad.com/sdj/...tdown.html

I know Dr. Baker has a strong background in issues related to accounting so I'd be appreciative of any further explanation he might offer here.
looks like 10.4% or so
written by pete, December 13, 2010 12:37
so about 3% dividends, if the 7% cap gains is correct.
boots
written by Ed Hardy, December 21, 2010 10:56
so about 3% dividends, if the 7% cap gains is correct.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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