Nasdaq may cross 4,000 for the first time in 13 years
The tech-heavy index was at about 3,981 Monday. It's become a grown-up version of its former self.
By Steven Russolillo, The Wall Street Journal
The Nasdaq Composite ($COMPX) is a far more mature version of its former self.
The tech-heavy index is poised to cross 4,000 for the first time in 13 years, a development that has stoked concerns another tech-bubble is forming. But the Nasdaq nowadays has more dividend payers, fewer dot-coms and a more reasonable valuation, a nod to the evolution of an index once only known for tech and growth stocks.
Currently, 51 of the top 100 Nasdaq stocks -- including Apple (AAPL), Microsoft (MSFT) and Cisco Systems (CSCO) -- pay dividends. (Microsoft owns and publishes MSN Money.) In December 1999, when the Nasdaq initially jumped above 4,000, only nine companies paid dividends, according to stock market research firm Birinyi Associates.
Between dividend increases and bigger share buybacks, the increase of shareholder-friendly moves in recent years have helped juice the Nasdaq as it approaches 4,000. The index currently sports a dividend yield of 1.41%, compared to 0.11% in December 1999. The S&P 500′s dividend yield is 1.91%.
Apple, which started paying a regular dividend last year, is illustrative of the Nasdaq’s trend. The iPhone and iPad maker has transformed from a high-flying growth stock to one that’s more characteristic of a plodding value stock over the past year, a fate similar to the likes of Microsoft, Cisco and Intel (INTC).
The Nasdaq finished Friday at 3985.87, its highest close since September 2000. It has risen in eight of the past 11 weeks and is up 32% this year, outpacing both the Dow and S&P 500.
Beyond dividends, there are other characteristics that show the differences between then and now. In 1999, there were 119 companies in the Nasdaq that had “.com” in their name. Now, there are 15.
And the Nasdaq now trades at about 25 times the previous year’s earnings, compared with 151 times trailing earnings in December 1999, Birinyi says.
In 1999, stocks were in a bubble. Now, the evidence isn’t as convincing.
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[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
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