the portfolio is exempt from taxes so any differences in the taxation of dividends a 570377

Dividend Yield Comparables.

William Leiderman is a portfolio manager for a U.S. pension fund’s domestic equity portfolio. The portfolio is exempt from taxes, so any differences in the taxation of dividends and capital gains are not relevant. Leiderman’s client has a high current income requirement. Leiderman is considering the purchase of utility stocks for the fund as of early April 2002. He has narrowed down his selection to three large cap utilities serving the southeastern United States, given in Table 4 20.

All of the securities exhibit similar and low market risk. Although Southern Company has the highest dividend yield, it also has the lowest expected growth rate. Leiderman determines that Progress Energy provides the greatest combination of dividend yield and growth, amounting to 11.19 percent.