Looking at the dividend yields of 22 of the world’s largest economies, it may come as a surprise to hear that the United States currently has the second-lowest yield at just 1.83%. The only country with a lower dividend yield at 1.19% is India which is currently trading at 29.63 times earnings. In addition to India and the US, there are nine other countries with a dividend yield below the global average of 3.23%. Contrary to India’s high valuation and subsequent low yield, Russia currently boasts the highest dividend yield of 6.23% and the lowest valuation with a P/E ratio of just 6.68. That is even though the country was the second best-performing equity market in 2019 having risen over 43% year to date.
Given that interest rates remain historically low around the globe, and holding constant the varying levels of risk between a country’s stocks and bonds, equities generally continue to offer investors a higher return. The chart below shows the spread between the dividend yield and 10-year sovereign bond yield for each of the 22 countries previously discussed. As shown, there are only six countries, including the US, in which 10-year sovereign bonds are more attractive than the country’s stock market dividend yield. Given India’s low dividend yield, it is the country that most favors its 10-year sovereign bond (yielding 6.71%) while the opposite holds true for the UK given the dividend yield of 4.78% and the 0.78% yield on the 10-year Gilt. Sign up for Bespoke’s “2020” special to read the “International Markets” section of our 2020 Outlook report. We cover a number of additional fundamental, technical, and economic comparisons for countries around the world.