After ranking the dow 30 stocks by dividend yield in

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Unformatted text preview: be comfortable with these stocks. After ranking the Dow 30 stocks by dividend yield, in May 2003, the following stocks emerged as the Dow Dogs: Table 2.1: Dow Dogs : May 2003 Company Price Yield Altria 42.31 6.05% General Motors 33.26 6.01% Eastman Kodak 30.28 5.94% SBC Communications 25.15 4.49% JP Morgan Chase 30.9 4.40% AT&T 19.25 3.90% DuPont 40.99 3.42% Honeywell 24.47 3.06% ExxonMobil 35.98 2.78% General Electric 27.64 2.75% As an investor considering this portfolio, you should ask yourself the following questions: 1. Would you want your entire wealth to be invested in only ten stocks, two of which are telecomm companies? From the standpoint of spreading your risks and diversifying, this does not seem prudent. 4 McQueen, G., K. Shields and S.R. Thorley, 1997, Does the Dow-10 Investment Strategy beat the Dow statistically and economically? Financial Analysts Journal, July/August, 66-72. This study examined this strategy and concluded that while the raw returns from buying the top dividend paying stocks is higher than the rest of the index, adjusting for risk and taxes eliminates all of the excess retur...
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This note was uploaded on 01/17/2012 for the course ECON 101 taught by Professor Econnorm during the Spring '11 term at Art Institutes Intl. Minnesota.

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