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Crunching the Numbers

For purposes of analysis, accept the argument that stocks that have high dividend yields are good investments. In this section, you will begin by first looking at dividend yields across companies in the United States to see what would constitute a low or a high dividend yield, and then at changes in dividend yields for the entire market over time. You will then look at the stocks that would have been identified as potential investments in the United States in October 2002, based upon their dividend yields.

Dividend Yields: Across Companies and Over Time

What is a typical dividend yield for a company and how has it changed over time? It is worth answering this question before you consider investment strategies based upon it. In Figure 2.4, the distribution of dividend yields on companies that pay dividends in the United States in October 2002 is presented.


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