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There are three key considerations that you have to take into account in adopting a high dividend strategy. The first is that some stocks with high dividend yields may be paying much more in dividends than they can afford. It is only a matter of time, then, before the dividends are cut. The second is that any firm that pays a substantial portion of its earnings as dividends is reinvesting less and can therefore expect to grow at a much lower rate in the future. Thus, you often have to trade off higher dividend yields for lower earnings growth in the future. The third is that you as an investor may have a much greater tax cost on this strategy, since dividends were taxed at a higher rate than capital gains until recently.

Table 2.3. Stocks with the Highest Dividend Yields in the United States: October 2002
Koger Equity IncR. E. I. T8.87%AmneriGas PartnersNatural Gas (Distrib.)9.54%
Telsp Celular ParticipacoesTelcom. Services8.91%RFS Hotel InvestorsR. E. I. T9.56%
Equity Inns IncHotel/Gaming8.92%Sizeler Prop InvR. E. I. T9.58%
Plains All American Pipeline LOilfield Services/Equip.8.96%Chateau Cmntys IncR. E. I. T9.61%
Apartment Invt & Mgmt CoR. E. I. T9.00%Crown American RltyR. E. I. T9.61%
Arden Rlty GroupR. E. I. T9.02%R.J. Reynolds TobaccoTobacco9.65%
Entertainment PptysR. E. I. T9.07%Redwood Trust IncR. E. I. T9.71%
DNP Select Inc FundInvestment Co.9.08%Heritage PropaneOilfield Services/Equip.9.83%
Glenborough Rlty TrustR. E. I. T9.11%U.S. Restaurant PpptysR. E. I. T9.83%
National Health Rlty IncMedical Services9.17%Mid-Amer Apt CmntysR. E. I. T9.98%
Great Northern Iron OreSteel (General)9.18%Aberdeen Asia-Pac FdInvestment Co10.00%
EPCOS AGElectronics9.19%San Juan Basin RltyNatural Gas (Diversified)10.00%
Ramco-Gershenson PptysR. E. I. T9.20%Crescent Real EstR. E. I. T10.01%
National Health Invs IncR. E. I. T9.23%JDN Realty CorpR. E. I. T10.14%
Tanger Factory OUtletR. E. I. T9.26%Ferrellgas Partners L PNatural Gas (Distrib.)10.16%
Star Financial IncR. E. I. T9.27%British Airways ADRAir Transport10.22%
PICO Hldgs IncInsurance (Prop/Casualty)9.30%Kratmont Realty TrustR. E. I. T10.32%
Town & Ctry TrR. E. I. T9.33%CMS Energy CorpElectric Util (Central)10.36%
Kilroy Rlty CorpR. E. I. T9.38%TCW Conv. Sec. FundInvestment Co10.37%
AMLI Res. Prop TrR. E. I. T9.39%Allied Capital CorpFinancial Svcs (Div)10.39%
Great Lakes REITR. E. I. T9.39%Plum Creek TimberPaper & Forest Products10.49%
First Indl Rlty Tr IncR. E. I. T9.41%Gables Residential TrR. E. I. T10.60%
Public Serv EnterpriseElectric Utility (East)9.43%American First Apt Inv L PInvestment Co10.66%
OGE EnergyElectric Util. (Central)9.47%Permian Basin Rty TrR. E. I. T10.90%
New Plan Excel RltyR. E. I. T9.49%Summit Pptys IncR. E. I. T11.05%
Mission West PptysR. E. I. T9.51%Gilmcher Tlty TrustR. E. I. T11.08%
Highwood Pptys IncR. E. I. T.11.25%Cornerstone RealtyR. E. I. T.15.09%
Nationwide Health Pptys IncR. E. I. T.11.36%AmeriservFinl IncBank15.25%
Alliant EnergyElectric Util. (Central)11.65%Airlese LtdTrucking/Transp. Leasing15.39%
Royce Value TrustInvestment Co.11.72%Annaly Mortgage Mgmt.R. E. I. T.16.19%
MicroFinancial IncFinancial Svcs. (Div.)11.77%Gabelli EquityInvestment Co.16.22%
Allegheny TechnologiesMetals & Mining (Div.)11.85%NovaStar FinancialR. E. I. T.16.42%
Books-A-MillionRetail (Special Lines)11.95%Associated EstatesR. E. I. T.16.56%
Westar EnergyElectric Util. (Central)11.96%NorthWestern CorpElectric Util. (Central)17.28%
Williams Coal Sm GsNatural Gas (Diversified)12.00%Fila Hldgs S P A ADRShoe17.62%
Vector Group LtdTobacco12.19%Bovar IncEnvironmental18.00%
Liberty All-StarInvestment Co.12.21%AquilaElectric Util. (Central)19.18%
Nordic Amer Tanker ShpMaritime12.39%Terra NitrogenChemical (Specialty)19.28%
ACM Income FundInvestment Co.12.48%Scheid VineyardsFood Processing19.69%
ABN Amro HoldingsBank (Foreign)12.67%Scott's Liquid Gold IncToiletries/Cosmetics20.83%
TECO EnergyElectric Utility (East)12.77%Apex MortgageCapitalFinancial Svcs. (Div.)23.01%
Advanced Tobacco ProductsTobacco12.82%Cookson Group PLCMachinery23.93%
Thornburg MtgR. E. I. T.12.83%General Chem GroupChemical (Basic)25.00%
Amer Elec PowerElectric Util. (Central)13.06%AES CorpPower26.32%
Sharp CorportionElectronics13.07%Etz Lavud LtdDiversified Co.26.32%
Post Pptys IncR. E. I. T.13.12%Capstead Mtg CorpR. E. I. T.29.04%
American Cap StrategiesFinancial Svcs. (Div.)13.63%Harbor Global Co LTDR. E. I. T.32.31%
MICROWAVE FILTERElectronics13.86%Telefonica de Argentina SATelecom. Services32.56%
MFA MortgageR. E. I. T.14.45%Dynegy Inc 'A'Natural Gas (Diversified)37.04%
Knightsbridge TankersMaritime15.00%   



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