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Unformatted text preview: hey may not be able to sustain. Sectors with more stable income and less
growth potential tend to pay more dividends. Real estate investment trusts offer a special
case since they are required by statute to pay 95% of their earnings in dividends. 7 7 Real estate investment trusts do not have to pay corporate taxes but they are required to pay high dividends. 28
A Portfolio of High Dividend Stocks
The best way to understand what a portfolio driven by high dividend yields would
look like is to construct one and then analyze its characteristics. Looking across the 7100
companies for which information was available in October 2002, you can develop a list of
the 100 companies with the highest dividend yields. The portfolio is presented in Table 2.3.
Given the discussion about differences in dividend policy across sectors, it should come as
no surprise that a few sectors are disproportionately represented in this sector. Real estate
investment trusts represent 40% of the stocks in the portfolio with utilities (electric and gas)
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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.
- Spring '11