dividends in the US (iii): the 1990s

The most important factor in the performance (or lack thereof) of dividend stocks during the 1990s came at the end of the decade, during the Internet mania.

What were called at the time Technology, Media and Telecommunications (TMT) stocks exhibited exceptionally strong performance for several years, despite the fact that prices were wildly high for much of that time and that many newly-minted members of the club had dubious fundamentals.  The fever was fueled by loony research reports by figures like Henry Blodget of Merrill (subsequently banned from the securities business, now writing on finance for Yahoo) and Mary Meeker of Morgan Stanley (now with Kleiner Perkins).  It also featured the takeover of AOL by Time Warner, which must be one of the most calamitous financial combinations of all time.  These outsized gains came at the expense of the rest of the market, particularly value (i.e., low PE, low price/cash flow, low price to assets issues).

So dividend stocks took another beating, a là the late Seventies, setting them up for a strong run of outperformance once the speculative bubble collapsed.

Tomorrow, the present.