Taking a look at high dividend yielding stocks (page 3 of 3)

Even if Rebif is not introduced before 2003 Serono is attractively valued compared to Amgen or Genentech with a strong balance sheet and an interesting early stage pipeline. We would use any forthcoming weakness as a buying opportunity.

Vodafone (VOD LN; GBP 1.56) said it added 2.5 million customers worldwide in the quarter ended September. The increase brings Vodafone's worldwide subscriber base to 95.6 million. Regions of strong growth were Southern Europe and the USA while high churn in Germany dampened growth rates. High churn rates are likely to continue in the quarters ahead but this should enhance the ARPU performance going forward. Additionally a newspaper report had it that Vodafone was expected to report first half proforma EBITDA up more than 40% yoy, beating company and analyst expectations. We believe that the company's fundamental picture is clearly improving. Vodafone is trading 15% above the pre-attack level and is one of the few companies to enjoy earnings upgrades by analysts. With the share-overhang in mind, we look to upgrade the stock to buy when equity markets stabilise.

Sodhexo Alliance (SW FP; EUR 46.10) reported strong sales growth for the fiscal year 2000/2001, ending August 31, 2001. Consolidated sales rose by 13.7% to EUR 11.9bln. Fourth-quarter sales rose 26% yoy. The trends coming out of Sodexho's full year sales release continue to show that its healthcare and education sales remain robust with organic growth of approx. 7% (47% of group sales) whilst its sales to business and industry customers (49% of group sales) continue to show slightly slower growth, particularly in the US, where we suspect Sodexho to have generated next to no growth in the fourth quarter.

We continue to like the catering sector. Leaders Sodexho and Compass have a big market opportunity in front of them and penetration remains low, especially in the attractive healthcare and education segments (only 25% of $40bn US market is currently outsourced). Whilst organic growth for Sodexho is not immune to slowing economies, we expect the downside risk to revenues and profits next year to be small and for organic growth to remain positive.

Sodexho will remain volatile until the US economy stabilises. However, we believe that the current valuation does already price a lot of pessimism. Sound cash flow will help Sodexho to weather the current weakness better than most of its competitors.

Zurich Fin. Serv. (ZURN VX; CHF 350) issued a profit warning today. ZFS doubled the estimates for claims related to the US attacks to USD 700-900 million. The company blamed lower investment income resulting from declining markets for the shortfall but gave no new guidance for 2001. ZFS opened the week down 10%. We removed the stock from our recommendation list on September 20, 2001 because of the lack of strategy and weak profit outlook. The latest profit warning does underline our assumption. While inexpensive we do not see a lot of upside potential from current levels.