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3 Foreign Telcos with Loud Yields

10/14/2011 11:30 am EST


Hilary Kramer

Editor, GameChanger Stocks

Cellular operators in New Zealand, Israel, and France are dirt-cheap and pay generous dividends to boot, says Hilary Kramer, editor of GameChanger Stocks, in this exclusive interview with

A lot of people are looking for income. Would you recommend dividend-yielding stocks?

Absolutely, especially now because obviously money markets, CDs, and even US Treasuries give us nothing, and yet we have a stock market that isn’t even modestly devalued—it is extremely undervalued. That means, with stock prices down, those dividend yields are even higher than they’ve been in a number of years.

Rather than going for the REITs, I really like some of the telecommunication providers, including some of the international opportunities like New Zealand Telecom (NZT), a very stable telecom provider, and Cellcom Israel (CEL). There is a dividend yield there that is in the upper single digits, which I think is excellent, and it’s got the market share in Israel.

You can also look at some of the European cell phone providers as well, including France Telecom (FTE), which is really a global player. And then there is always our stalwart back home here stateside, Verizon (VZ). You can’t go wrong, even with their debt load.

When you’re looking at dividend yields, what are the things that you should use to screen out the stocks that are just really bad?

One of the aspects I look at is whether or not there has been a consistency with the actual dividend quarter to quarter and year to year. Very often, I’ll see an excellent strong dividend, but I’ll find out it’s a one-time special dividend or that it’s been canceled in the past. I’ll also look at companies’ debt-to-equity ratios.

A lot of companies have cleaned up their balance sheets, so good debt-to-equity ratios shouldn’t be too difficult, right?

Yes, companies have gotten a lot more healthy. That includes pharmaceutical companies like Eli Lilly (LLY), Pfizer (PFE), and Johnson & Johnson (JNJ).

The dividend yields may not be as high as those of some of the telecommunications stocks, but if companies like Pfizer can execute their strategies they can unlock value. For example, Pfizer has a strategy to spin off the animal health division, as well as perhaps nutrition.

It’s very similar to what Bristol-Myers (BMY) did with Mead Johnson (MJN), and Mead Johnson, the baby-formula division, ended up tripling. So shareholders of Bristol-Myers ended up with this incredibly valuable stock.

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