Bogle: Stocks Priced For 6% To 7% Returns

Legendary Vanguard Founder Jack Bogle says not to worry about short-term issues like the recent emerging market turmoil. Over the long haul, it’s the performance of companies that will drive stocks, he says, and he thinks corporate growth is indicating stocks should grow 6% to 7% annually.

“In the long-term … all value [is] created by corporations, which means, in an odd way, stocks are derivatives,” Bogle tells CNBC. “They’re derivatives of the value created by our corporations.” He said he expects corporate earnings to grow by 4% to 5% going forward. Adding in current dividend yields of about 2%, he says that makes for projected returns for stocks in the 6% to 7% range over the long term. Bogle also said that valuations are “high, but not extremely high.”

Bogle also said that strong growth in dividends was an overlooked part of last year’s market surge. In fact, he says investors in general “don’t pay nearly enough attention” to dividends. And he talks about why earnings don’t mean as much as they used to when it comes to valuing stocks.

Validea’s Hot List portfolio is up 232% since its mid-2003 inception vs. 79% for the S&P 500. Check out its holdings here.