Are You Rich?
Are you rich? That is a question that invariably is asked by most investors at some point. It is a natural question. You earn, paid off debt, save, invest, and build wealth. You want to know am I rich? Surprisingly, it does not take much to be considered rich or wealthy although it partly depends on how you define it.
First, let’s look at the very rich or very wealthy. These people are not in the top 10% but in the top 1% or higher. In all likelihood you will not make it to this level of wealth. At present, this group includes people with relatively new money like Warren Buffet, Jeff Bezos, Bill Gates, Michael Bloomberg and even old money like the Rockerfellers, Vanderbilts, and heirs to other industrialists. However, it also includes people who are not worth tens of billions but even hundreds of millions. You need a net worth over roughly $10.3 million to be in the top 1%. Granted, there is a significant difference between someone who is worth $10 million and Bezos who is worth over $220 billion if we combine his and his ex-wife’s fortunes.
Are You Rich Based on Income?
Are you very rich based on income? To get into the top 0.1% you need about $2.37 million in annual income. Again, this is not really attainable for most people. How about the top 1%. It takes an annual income of $515,371 to make it to the top 1% using 2017 income tax data. However, the income level to get into the top 1% varies based on geography. The cost of being comfortable instead of rich also varies based on geography. It takes over $1.1 million in Silicon Valley and over $400k in San Antonio, Texas. It is unlikely that most of us will ever get into the top 1% based on income. Doctors, lawyers, engineers, scientists, financial advisors, managers, etc. simply do not earn that much for the most part. You generally need to start a business to get to that level.
Let’s define being rich as someone who is in the top 10% for income. This is much more attainable for most people. So, are you rich based on income? Well, based on 2017 income tax data, it takes an income of $145,135 to be in the top 10%, as seen in the chart below. This is much more attainable. You can assess where you are in the chart.
This is not the final word on if you are rich based income though since you can look at it from the perspective of households or families and individuals. In 2020, to be in the top 10% as an individual you need to earn at least $125,000 and as a household you need to earn at least $200,100. If you are household then you need to earn $201,000 to be in the top 10% and $531,000 to be in the top 1%. The numbers for the top 10% are much more attainable than the top 1%.
Let’s look at whether you are rich based on income in one more way. The latest U.S. Federal Reserve Survey of Consumer Finances was recently published. According to this survey, the median income to be in the top 10% in 2019 was $283,000 while the mean income was $487,600. This suggests that that some high earners are skewing the mean upward.
Are You Rich Based on Net Worth?
Are you rich or wealthy based on net worth? There is another way to look at this beside income as you can see in the table above. We can consider net worth. One may argue that this is a better way of looking at it. Since there are plenty of people who have modest incomes but qualify as rich or wealthy based on net worth. If you don’t believe me just read my article on Secret Dividend Millionaires. You can read what it means to be independently wealthy.
You need over $43 million to be in the top 0.1% based on net worth. Even for the top 1% you need to have a net worth of over $10 million. Realistically, it is pretty hard for most everyday people like you and me to achieve these values. Pretty much unless you start a business, play pro sports, make it big as a singer or actor, was an early hire in a tech company it is pretty much a difficult thing. On the other hand, making it into the top 10% is much easier. You need only $1,182,390. You can do this by systematically investing in a retirement plan over 30 years or so.
Let’s look at whether you are rich based on net worth in one more way. The latest U.S. Federal Reserve on Consumer Finances states that median net worth for the top 10% is $1,589,300 while the mean net worth is $4,850,100. Again, this suggests that some high net worth people are skewing the mean upward.
In any case, you now know whether you are rich based on income, net worth, or both.
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Dividend Increases and Reinstatements
V.F. Corporation (VFC) hiked the regular quarterly cash dividend by 2.1% to $0.49 per share per from $0.48 per share. VFC is a Dividend Champion and Dividend Aristocrat having raised the dividend now for 48 consecutive years.
Avient Corporation (AVNT) raised the regular quarterly cash dividend by 4.9% to $0.2125 per share from $0.2025 per share. This is the 10th straight increase making the stock a Dividend Contender.
Winmark Corporation (WINA) announced a special dividend of $3.00 per share.
A.O. Smith increased the regular quarterly cash dividend 8.3% to $0.25 per share from $0.24 per share. This is the 27thyear in a row the dividend was raised making the stock a Dividend Champion and Dividend Aristocrat.
Williams-Sonoma (WSM) hiked the regular quarterly cash dividend 10.4% to $0.53 per share from $0.48 per share. WSM is a Dividend Contender having now raised the dividend for 15 consecutive years.
Ameren Corporation (AEE) raised the regular quarterly cash dividend by 4% to $0.515 per share from $0.495 per share. This is the 7th straight increase. The stock is a Dividend Challenger.
Coronavirus Dividend Cuts and Suspensions List
I updated my coronavirus dividend cuts and suspensions list this past Wednesday. The number of companies on the list has risen to 426. We are well over 10% of companies that pay dividends having cut or suspended them since the start of the COVID-19 pandemic. The number of companies on the list continues to rise each week.
One new company was added to the list in the past week: Gouverneur Bancorp (GOVB).
I included 3 companies that I had previously missed. The 3 companies that I previously missed were ING Groep N.V (ING), Inter Pipeline Ltd. (IPPLF), and AG Mortgage Investment Trust (MITT).
I added an article on Molson Coors (TAP) Dividend Suspended this past week. Molson Coors is one of the world’s largest beer brewers. The company has struggled with legacy brands, low margins, and now the COVID-19 pandemic. Local government restrictions and social distancing have made for a challenging operational environment. I add a new article on a dividend suspension or cut almost every week.
Dow Jones Industrial Averages (DJIA): 28,607 (+0.07%)
NASDAQ: 11,672 (+0.79%)
S&P 500: 3,484 (+0.20%)
The S&P 500 is trading at a price-to-earnings ratio of 35.1X and the Schiller P/E Ratio is at about 31.9X. These two metrics ticked up a notch since last week. This is the third week in a row that these valuation metrics have increased. Note that the long-term mean of these two ratios are 15.8X and 16.7X, respectively. I continue to believe that the market is overvalued at this point. I personally view anything over 30X as overvalued.
After several down weeks the market has recovered the past three weeks. Mega cap tech stocks are still down from their 52-week highs. But other stocks that have not really participated in the market recovery have started to trend up. This is seen in improving market momentum and the number of stocks hitting 52-week highs trending up again.
S&P 500 PE Ratio
Shiller PE Ratio
Stock Market Volatility – CBOE VIX
The CBOE VIX measuring volatility went up again about 2.4 points to 27.4 reversing improving trends. The VIX still remains elevated relative to the long-term average. The long-term average is approximately 19 to 20.
Overall, I think the higher volatility is reflecting higher COVID-19 infection and death rates in the U.S. that have been trending up since mid-September. New infections are now over 64,000 per week, which is the highest since July. Additionally, it looks like the likelihood of an approved vaccine being available this year is fading. Investors are also realizing that there is little likelihood of federal stimulus being passed before election or even before end of the calendar year. The administration and House are fairly close in dollar value but there are a few sticking points regarding aid to states and local governments, testing and tracing, and earned income tax credits, and a few other areas. That said, the administration and House are still far from the Senate majority leader’s dollar value of $500 billion. It is unlikely that this gap will be narrowed in my opinion, especially since the Senate majority leader is not seemingly involved in any negotiations at this point.
Fear & Greed Index
I also track the Fear & Greed Index. There are seven indicators in the index. They are Put and Call Options, Junk Bond Demand, Market Momentum, Market Volatility, Stock Price Strength, Stock Price Breadth, and Safe Haven Demand.
The current reading is now at 62, which is in Neutral. The index moved up 7 points from last week after a 15 point gain the week before. Two weeks ago, the index was in Fear with a reading of 40.
Put and Call Options are signaling Extreme Greed with the volume of put options is low and lagging call options by 59.3%. Junk Bond Demand is also indicating Extreme Greed with a low spread of 2.134 over investment grade corporate bonds. Market Momentum is at Greed as the S&P 500 is 8.7% over its 125-0day average, which is more than normal. Market Volatility is Neutral. Safe Haven Demand is Neutral as stocks have outperformed bonds by 5.23% in the past 20 trading days, which is normal. The number of advancing issues is increasing but still within the normal range, so Stock Price Breadth is Neutral. Lastly, Stock Price Strength is signaling Fear as the number of stocks hitting 52-week highs compared to the number of stocks at 52-week lows is at the lower end of its range.
The number of weekly new unemployment claims were up with last week at 898,000. This is up 53,000 from last week’s revised numbers. We seem to be bouncing around between 800,000 and 900,000 for now. But for some perspective, one-year ago weekly unemployment claims were only about 218,000. Currently we are 4X the normal level. The seasonally adjusted insured unemployment rate was 6.8%. The weekly revised rate is now 7.5% to 7.7%
The ten states with the highest unemployment rates were Hawaii (17.9), California (16.1), Nevada (12.5), Puerto Rico (10.5), Louisiana (10.3), Georgia (10.1), New York (10.0), District of Columbia (9.1), Michigan (9.0), and New Mexico (8.8).
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in September driven primarily by a 6.7% increase for used cars and trucks (the largest monthly increase since February 1969). Energy rose by 0.8%, while the natural gas increased by 4.2% for the month. All items besides food and energy rose 1.7% year-over-year. Food increased by 3.9% over the last 12 months, while the energy declined by 7.7% in the same time period.
The U.S. Commerce Department reported retail sales rose 1.9% in September, up from August’s increase of 0.6%. Excluding autos, the gain was only 1.5%. Clothing and accessories rose 11%, while sales in the sporting goods increased by 5.7%. Electronics and appliances fell by 1.6% over the August levels, which is a decline of 6.4% from the prior year.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.