This preview shows page 1. Sign up to view the full content.
Unformatted text preview: r-weighted in financial service, utility and real estate investment trusts
(REIT) stocks. While this is not necessarily a negative, investors have to be aware of this
fact when they construct these portfolios.
As noted earlier in this chapter, different dividend policies attract different clientele.
Not surprisingly, investors who buy stocks in high dividend paying sectors tend to view
more dividends as a good thing and to reward companies that pay higher dividends. The
same cannot be said about investors who buy technology or biotechnology stocks.
Why do some sectors pay more in dividends than others? While part of the reason
may lie in the history of these sectors, a great deal of the differences in dividend policy can
be explained by differences in fundamentals. Sectors with higher growth potential and more
volatile earnings tend to pay less in dividends, especially relative to market value. Firms in
these sectors often have to reinvest their earnings to grow and are also wary of paying out
dividends that t...
View Full Document
- Spring '11