Taking a look at high dividend yielding stocks (page 1 of 3)

US Stocks

The stock markets rallied on the belief that the government will do all it can to keep the economy on track, with a USD 60-75 billion stimulus package. It's also rallying because Cisco said its earnings would be able to meet analyst expectations for the quarter ending Oct 31. And there were also some good non-manufacturing NAPM numbers.

Cisco aside, we are stepping into the 3Q reporting season, further disappointments would wreak havoc in an already fragile market. The long awaited attack on Afghanistan has started, and investors are waiting to see what will be the counterattack from the terrorists. The uncertainty will definitely put a damper on the market.

Morgan Stanley conducted a survey on the CFOs of its of 225 companies. Whereas 15% said they planned to cut or delay IT spending six months ago, the percentage has now risen to around 40%. And 30% said they would definitely be spending less than six months ago.


Taking a conservative approach, investors can look into stocks with high dividend yields, and meet the following criteria:

• Low debt outstanding (debt/equity < 50%)
• Good cash flow
• High pay-out ratio
• Total debt = or < 40% of capital structure
• Market capitalization more than $1 billion
• Interest expense coverage equal to or more than 2x
• Net dividend yields > or = 3%

American Financial Group Inc - provides multi-line property and casualty insurance (net yld: 3.3%)

Hospitality Properties Trust - acquires, owns, and leases hotel properties throughout the US. The hotels are marketed under the "Marriott" logo (net yld: 7.64%)

Public Storage Inc - invests primarily in existing mini-warehouses, self-service facilities which offer storage space for personal and commercial use (net yld: 3.06%)

RJ Reynolds Tobacco Hdlg. Inc - #2 tobacco company in the US (net yld: 3.76%)

Rockwell int'l Corp - provides industrial automation, power, control, and information solutions (net yld: 4.33%)

Worthington Industries - processes steel and fabricates metal, focusing on specialized products - flat rolled steel, metal farming products & automotive body panels (net yld: 3.61%)

It is important to understand, however, that there is a 30% withholding tax on dividend income for non-US investors. Furthermore, earnings decline might prompt management to reduce dividend payment or eliminate it.

US Technology

Nortel Networks (NT US $5.55 CSFB rating: BUY, CSFB MG V: Short-term Hold) joined the warnings parade last week, damping the positive tone of the Federal Reserve's ninth interest rate cut this year. Nortel is presently expecting a net loss of $3.6 billion for the 3Q01 as sales fell to $3.5 billion (from consensus estimates of $3.9 billion) due to the weakness in demand for telecommunications equipment in all geographic regions (excluding Asia). The company is now expecting revenues to come up $500 million short of previous expectations for $4 billion. In its continued effort to downsize and to rework its current breakeven plan to reflect expected revenues for the first quarter of 2002 (with revenue "well below $4 billion," compared with a forecast for a breakeven level at $5 billion), the company plans to shed an additional 20,000 jobs.

Compared to what Nortel was in 3Q00 (over 94,000 employed and a revenue of $7.3 billion), it will be less than half of what it was before with its headcount dropping to 45,000, and its revenue to $3.5 billion.