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Unformatted text preview: firms that are paying out more in dividends than they can
• Reasonable expected growth in earnings per share: If you want price appreciation
in addition to high dividends, the companies you invest in have to be able to grow
earnings. Though it is unrealistic to expect high dividend yield stocks to grow 41
earnings in the double digits, you can require earnings growth that matches overall
growth in the economy.
In October 2002, you could screen for firms with dividend yields that exceed 4% (the
treasury bond rate at the time of the analysis), dividend payout ratios less than 60%,
dividends less than FCFE and expected growth rate in EPS over the next five years greater
than 4%. Since real estate investment trusts are structured so differently from other firms,
you should eliminate them from the sample as well. The resulting portfolio of 30 companies
is presented in the appendix.
This portfolio is much more diverse in terms of industries represented than the
original sample of 100 firms with the...
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- Spring '11