It seems it has been some time since I updated the performance of Standard & Poor's Dividend Aristocrats. Year to date through November 4, 2009, the Aristocrats have generated a better return than the Dow Jones Industrial Index, 12.2% versus 11.7%, respectively. However, the Aristocrats performance has trailed the return on the S & P 500 Index's return of 15.9%.

In the below table, I have shaded the rows for those companies that have cut their dividend this year.

October was a down month for the S&P 500 Index seeing the index decline 1.87%. During the month, the dividend payers finally did outperform the non-payers, -2.3% versus -6.2%, respectively. This is the first time payers have outperformed the non-payers this year. On a year to date and 12-month time frame, the non-payers continue to maintain a significantly higher return than the dividend payers.

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In looking at the percentage of S&P 500 Index stocks trading above their 50 day moving average, the market looks to be near a short term oversold position.

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One of the American Association of Individual Investors' better performing stock screens over the long run is the Piotroski Price to Book Screen.

Of late the number of companies passing the screen's criteria has been slim to none. The criteria of the screen are:

Consuelo Mack of WealthTrack interviews James Grant, Editor of Grant's Interest Rate Observer. By nature, James Grant is a glass is half empty type of person, yet he believes the economy will surprise to the upside and be surprisingly strong.

In the interview, Grant cites a quote from English economist, A.C. Pigou,

On Friday Stryker Corp. (SYK) announced the company's dividend payment would be transitioned to a quarterly dividend from an annual one. In order to accommodate this change, SYK will pay a 10 cent fourth quarter dividend for 2009.

• This will bring total 2009 dividends to 50 cents per share versus 33 cents per share paid in 2008. This represents a 51% increase in the dividend on a year over year basis.

Individual investors do not appear to have reached the overly bullish state as of yet.

Last week Dividend Aristocrat Supervalu (SVU) cut the company's dividend by 50%. SVU becomes the first consumer staples stock to reduce its dividend.

• The new quarterly dividend is reduced to 8.75% from 17.5%.

• The company's second quarter earnings came in at 35 cents per share versus 61 cents per share in the same quarter last year.

• Full year earnings for February 2010 are estimated to come in at $1.94 and February 2011 earnings are projected at $2.01.

Investors who stuck with equity investments (S&P 500 Index) in October 2008 and through the March 2009 sell off would now be up 9% from October 2008 through August 2009. Many investors liquidated equity investments in October and again in March.

• Investors withdrew $70 billion from the stock market in October 2008 and another $50 billion in the February/March 2009 period.

• As of October 16, 2009, one year after the peak in liquidations, investors who remained in the stock market had fared better than those who exited at the peak of the crisis and stayed on the sidelines.

As readers may have noticed from the limited number of posts to my blog this week, I was away from the computer due to some out of town travel. I traveled by car from Ohio to Florida on I-75. Along with my travel companion, we both commented on the number of semi trucks that were traveling the highway. The parking lots at a couple of truck stops we passed were packed full with semis. Even several of the rest areas were packed with semis. I am guessing all these trucks were not traveling with empty loads.

At a minimum, I think the economy is experiencing some inventory restocking activity and possibly a pick up in consumer demand.

As I have noted in several earlier posts, Congress is looking to place a tax on stock trades. They have not given up on this trading tax as noted by the below screen shot from my Site Meter account.

Investors are often advised to spread their investments across differing asset classes because of the lower correlation of these other asset classes. Unfortunately, the correlation of many of these other asset classes has continued to increase.

I have discussed this issue of higher correlation in earlier posts:

This week's sentiment survey by the American Association of Individual Investors saw bullish investor sentiment jump by 12.21 percentage points. The bull/bear spread was reported at +14 versus -6 last week. These weekly measures are volatile and looking at the 8-week moving average smooths out this variability. The 8 week average increased to 39.56% compared to 37.90% last week.

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The bullishness reading is a contrarian indicator and a continued increase in individual investor bullishness would be one signal the market could be approaching at least a short term top.

When determining the future direction of the market, many investors and strategist turn to the price-to-earnings ratio. One key to using the P/E ratio is the calculation of earnings. Earnings are reported in several forms, one being "reported earnings" and the other referred to as "normalized" earnings. One significant point made in the article is the justification of using normalized earnings. Easterling notes,

...if you only look at the P/E ratio reported for any quarter or year, the ratio during peaks and troughs will be quite distorted when compared to the more stable long-term average. About every five years or so, the reported P/E will reflect the opposite signal in contrast to a more rational view of P/E valuations. For example, the reported value for P/E in early 2003 reflected a fairly high value of 32 just as the S&P 500 Index had plunged to 800 (E had cycled to a trough of $25 per share). A P/E of 32 generally screams “sell” to most investment professionals; yet, in early 2003, that was a false signal! A more rational view using one of the business cycle-adjusted methods reflected a more modest 18. In a relatively low inflation and low interest rate environment, the scream should have been “Buy”…

Over the past month, investor bullish sentiment has continued to trend lower as measured by the 8-period moving average of the bullish sentiment reading. Last week's bullishness reading of 35.09% feel below the long term average of 38.94% as reported by the American Association of Individual Investors. Additionally, last week's reading was nearly 8.5 percentage points lower than the bullishness reading in the prior week. The bull/bear spread was -6% versus +8% last week.

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Argus Research performed a back-of-the-envelope value of Tobin’s ‘q’ – which is a measure of market valuation. This is based on the Federal Reserve's recently released quarterly Flow of Funds data for the second quarter of 2009.

Investors will recall that 'q' is defined as the ratio of the market value of a firm to the replacement cost of its assets; in this case we are estimating those figures for the entire industry. According to Nobel Laureate James Tobin, the ratio of total stock market value to the stock market’s net worth (corporate net worth) is a reliable indicator of market valuation. When the stock market trades at a ‘discount’ to the replacement cost of its assets, the market is inexpensive, or cheaper to buy than build. This discount possesses 'q' ratios that are less than 1.0. Conversely, when 'q' exceeds 1.0, the market trades at a premium to its replacement cost. The run-up from 1996-2000 had 'q' approaching the unthinkable value of 2.0. The most recent (QII 2009) level of 0.78 is notably higher than the 0.65 posting in the first quarter, which was the lowest since QIV 1990.