"Street Critique"-Hilary Kramer Says Studying Stocks Pays
Wednesday, November 01, 2006PAUL KANGAS: While many stocks with high yielding dividends also carry high price tags, tonight's "street critique" guest says there are some undervalued gems with strong yields and you can find them if you do your homework. She's Hilary Kramer, market strategist and personal finance editor at aol.com.Hilary, welcome back to NBR.
HILARY KRAMER, PERSONAL FINANCE EDITOR, AOL.COM: Thank you, Paul.
KANGAS: Tell me about these undervalued stocks with the big dividend yields. What's your thinking behind this strategy?
KRAMER: The market is so frothy right now with these big cap stocks, the Dow 30, there's so many 52-week highs, the way to go is to find dividend yield and opportunities.
KANGAS: but you know that old Wall Street axiom says high yield usually means high risk. What's the risk picture here?
KRAMER: Not necessarily with all stocks. If you have a strong earnings, cash flow, then the companies will give it to shareholders in the form of a dividend.
KANGAS: All right. Let's get right to individual issues. Tell me what you like.
KRAMER: Suburban Propane, SPH, one of my favorite stocks. You're talking about a dividend well over 7 percent.
KANGAS: My goodness.
KRAMER: . and hoping to increase soon. Suburban Propane has a million customers. They service the propane market, fuel oil. They have a large network. It's very hard for customers to switch. There's a lot of loyalty there and you can't go wrong even with the stock being at a 52-week high.
KANGAS: So the big yield does not mean big risk in this case because of the steady business.
KRAMER: That's right.
KANGAS: OK, let's move right along. Let's have another one that you like.
KRAMER: Verizon. Verizon has now come full circle especially now that they've finished really truly their MCI integration. They are very strong in the corporate market, commercial market. The stock is undervalued because there's concern about them losing fixed line business, but that's not what the revenue driver is for the future and you have a nice dividend yield there.
KANGAS: OK, let's have another one.
KRAMER: OK, Puget energy. I'm always looking for the utility companies that will give you a nice, strong yield but at the same time are undervalued, could even be, you know, acquisition target, and in a growing area, for example, the northwest, which is what you have with Puget Energy.
KANGAS: OK. That sounds like a very interesting stock. And then what, what else do you like?
KRAMER: Scottish Power, SPI. This is one of the largest utilities in Europe. Strong in wind power, big footprint globally, internationally. They'll do even better here on the dividend and Scottish Power is a true acquisition target. They sold the business to Berkshire Hathaway recently and now they're sitting there and they're really a duck waiting to be acquired.
KANGAS: We have time for one more, Hillary.
KRAMER: Telstra. This is the Australian telecom giant, very similar to a Verizon, undervalued because there's concerns over regulatory fighting. But this is a company that also owns 50 percent of the second largest cable operator in all of Australia, fixed line business, wire business. You can't go wrong if you want a solid international stock.
KANGAS: And do you own any of these stocks or have any other discloses to make?
KRAMER: No.
KANGAS: OK, I imagine most of them have been regular dividend boosters, also. True?
KRAMER: That's right, especially for Suburban Propane. They're hoping to come up 3 percent.
KANGAS: Thanks very much for being with us tonight, Hillary. We'll see you again on November 15th.
KRAMER: Thank you, Paul.
KANGAS: My guest, Hilary Kramer, personal finance editor at aol.com.
