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Unformatted text preview: l service firms (banks, investment companies and insurance) representing about
Another striking aspect of this table is the magnitude of the dividend yields. Many
of these stocks have dividend yields in excess of 10%. Since the treasury bond rate was
about 4% in October 2002 and investment grade corporate bonds were yielding in the 5-6%
range, you can see the allure of these stocks to investors in search of high cash yields on
their investments. It is worth noting, however, that the dividends represent dividends paid
over the last financial year whereas the stock price is the current price. The price will
therefore reflect more updated information about the firm. If bad news has come out about
the firm recently, the price will have dropped and the resulting dividend yield will be high.
This is especially so for the stocks with dividend yields of 20% or higher. Investors should
exercise due diligence by examining more recent news releases before they plunge into
these stocks. 29 T...
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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