The 30-Year Treasury auction, the so-called Long Bond, had a strong participation for what is technically a 29-year and 11-month bond. The participation rate was strong enough that this still shows a safety bias over risk. What is amazing is that 12 of the 30 Dow Jones Industrial Average components now yield 3.30% or higher. The bid-to-cover ratio was 2.85 and the yield of the 3.75% coupon came to only 3.31%. Almost 74.5% went off at the high as well. The price, $108.310327…
Imagine a world where an investor, before federal income tax and before inflation, is willing to loan a cash-strapped and debt-burdened nation funds that will only roughly double in thirty years. What about Dow Jones Industrial Average stocks that yield more than the 30-Year Treasury?
- AT&T Inc. (NYSE: T) yields about 6.2% after the trouble arose from the T-Mobile deal, and at $28.22 it is down 11.5% from its 52-week high.
- Chevron Corporation (NYSE: CVX) yields 3.30%, and at $96.75 it is down 11.9% from its 52-week high.
- Dupont, or EI DuPont de Nemours & Co. (NYSE: DD) yields 3.7%, and at $45.20 it is down just over 20% from its 52-week high.
- General Electric Co. (NYSE: GE) is now close to a 4.0% dividend yield, and at $15.57 it is down 28% from its 52-week high.
- Intel Corporation (NASDAQ: INTC) now yields 4.1%, and at $21.05 it is down about 12% from its 52-week high.
- Johnson & Johnson (NYSE: JNJ) now yields about 3.6%, and at $63.50 it is down 6.7% from its 52-week high.
- Kraft Foods Inc. (NYSE: KFT) yields 3.4%, and at $34.35 it is down 5% from its 52-week high.
- Merck & Co. (NYSE: MRK) yields about 4.8%, and at $31.95 it is down 15% from its 52-week high.
- Pfizer Inc. (NYSE: PFE) yields 4.4%, and at $18.30 it is down almost 15% from its 52-week high.
- Procter & Gamble (NYSE: PG) yields 3.4%, and at $62.56 it is down 7.6% from its 52-week high.
- The Travelers Companies, Inc. (NYSE: TRV) yields 3.3%, and at $48.75 it is down 24% from its 52-week high.
- Verizon Communications Inc. (NYSE: VZ) yields 5.7%, and at $35.40 it is down 9% from its 52-week high.
These incredibly yields almost certainly will have to compete with higher interest rates at some point over the next 29.875 years. That means that the face value will likely be lower, and the face value (market price) could possibly be significantly lower. To become a member of the famed Dow Jones Industrial Average, a company is supposed to have significant ability to maintain a dividend payout through most business cycles and they are expected to be key contributors of the economy.
With this many yields this high, will these share prices remain under pressure at all points along the next 30-years? Some might say yes, but this is making stocks look dirt cheap. That is why they call it “Risk versus the safety premium.”
JON C. OGG