Jim Jubak from MSN Money recently listed 10 picks for income investors.  Jubak also expressed caution to his readers who are to hung up with extremely high dividend yields.  Genco Shipping (symbol GNK) as an example currently shows a 35.2% yearly dividend yield on Yahoo Finance.  But high dividend yields can and do get eliminated often in bear markets.  Just look at the mix of financial shares, whose incompetent CEO’s announced one week that they were adequately capitalized, and days later eliminated dividends and begged taxpayers for handouts.


With that word of caution against lofty dividends, Jubak goes on to list his 10 dividend play picks.  Among them are:

  • Enbridge Energy Partners (symbol EEP)
  • Energy Transfer Partners (symbol ETP)
  • Natural Resource Partners (symbol NRP)
  • Caterpillar (symbol CAT)
  • JPMorgan Preferred G (symbol JPM-G)
  • Rayonier (symbol RYN)
  • Chevron (symbol CVX)
  • Deere (symbol DE)
  • FPL Group (symbol FPL)
  • Nucor (symbol (NUE)

Unfortunately, there is NOT one on Jubak’s list that I’m eager to throw my own money at.  The first 3 are paying out close to or in some cases more in dividends than they make in income.  I just don’t see those level of dividend payments as sustainable.  And if they are, I question the logic of any CEO who would borrow money from the capital markets just to pay dividends to shareholders.

The rest of Jubak’s list is just to debt intensive for my blood.  2007 was the year for debt financed mergers and stock buy backs.  In 2008, investors have wisened up and they are now looking for long term and sustainable growth in well managed companies.

With that said, here are the latest Geldpress dividend picks:

  1. Wabtec (symbol WAB) – Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation (Wabtec), is a provider of technology-based equipment and services for the global rail industry. The Company primarily serves the worldwide freight and passenger transit rail industries.  The dividend yield is tiny, at only .10%, but rather than increase the dividend, the company instead chose to pay down nearlt $400 million in long term debt over the last 8 years.  Their current debt/equity ratio is only .219, according to Yahoo Finance.  For my own account, I recently purchased shares in Wabtec, and hedged them by selling an in the money covered call against them (Jan 40). My personal called out return will be 7.1% over 5 weeks, not counting commissions.  If I don’t get called out, I’ll decide in January what my next move will be.  More aggressive players can sell an out of the money covered call (Jan 45), or just buy and hold Wabtec shares naked.
  2. Bristol Myers Squibb (symbol BMY) – Bristol-Myers Squibb Company (BMS) is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceuticals and other healthcare-related products.  According to Yahoo Finance, it currently pays a dividend of 3.4%, based on today’s closing price.  It’s current debt/equity ratio is less than .5, but with it could easily pay off the entire long term debt using its nearly $7.5 billion in cash.  In my own account, I recently purchased shares in Bristol Myers, and am currently holding them naked. I may or may not hedge the position in the future.
  3. Bemis Company Inc (symbol BMS) – Bemis Company, Inc. is a manufacturer of flexible packaging products and pressure sensitive materials. The Company sells its products to customers throughout the United States, Canada, South America and Europe, as well as Asia Pacific and Mexico. It operates in two segments: Flexible Packaging and Pressure Sensitive Materials.  The current dividend yield is 3.4%.  In my own account, I recently purchased shares in Bemis, and am currently holding them naked. I may or may not hedge the position in the future.

***Disclaimer: Geldpress picks are NOT advice of any kind.  Trade at your own risk!  You can lose money!