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TWEEDY, BROWNE COMPANY L.P.
What Has Worked in Investing
(continued from preceding
page)
Investment Results of U.K. Companies According to Dividend Yields, January 1955 through December 1988
|
1 2 3 4 5 6 7 8 9 10 Financial Times-Actuaries All Share Index |
|
Investment Return |
of £1 Million Average in January 1955 at December 1988 |
Market Cap (£million) |
A report which describes Professor Levi's dividend yield study, Market Anomalies: Are They A Mirage Or A Bona Fide Way To Enhance Portfolio Returns? by Michael Lenhoff, January 19, 1990, notes that: "there is a near perfect inverse correlation between the ratio of price to net asset value [i.e., book value] for the U.K. equity market and yield. When price stands significantly at a discount [premium] to the net asset value, the yield available from U.K. plc is significantly above [below] the long run range." Mr. Lenhoff also notes that the price/earnings ratio of high dividend yield companies are usually low in relation to the price/earnings ratio of the entire stock market and that the high yield companies are often takeover candidates.
In Tweedy, Browne's experience, high dividend yield on stocks in the U.K. and throughout the world is often associated with stocks selling at low prices in relation to earnings, book value and specific appraisals of the value that shareholders would receive in a sale of the entire company based upon valuations of similar businesses in corporate transactions.
Companies Throughout the World: High Dividend Yield
A. Michael Keppler examined the relationship between dividend yield and investment returns for companies throughout the world in "The Importance of Dividend Yields in Country Selection," Journal of Portfolio Management, Winter, 1991. Mr. Keppler's study assumed an equal weighted investment each quarter in each of the following eighteen Morgan Stanley Capital International National equity indexes
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