Biggest Obstacle to an S&P 500 Record Is Companies Hoarding Cash
- S&P’s fair value is 3,132, BI’s dividend discount model shows
- Majority of S&P stocks are expected to keep current dividends
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Add this to the roadblocks the S&P 500 is facing on an ascent to a record: Companies aren’t returning money to shareholders.
Firms in the index cut have dividends by the most since 2009 this year, and if the cash preservation trend remains intact, the benchmark will likely keep trading below its February peak, according to Bloomberg Intelligence. Its dividend discount model, which determines the fair value of the S&P based on the present value of its future dividend payments, shows the gauge is fairly priced at 3,132, near the midpoint of where it’s traded since late May. The S&P 500 is still about 3% below its pre-pandemic high.