High-yield recommendations

Dear Mr. Berko:

I have about $22,000 to invest for income and some growth. Could you possibly recommend several issues that pay between 8 percent and 12 percent and have some growth remaining? I know this isn't easy, but I'd appreciate a couple high-yield recommendations and hope I can do as well with your current recommendations as I have in the past.

D.L., Fort Walton Beach, Fla.

Dear W.R.:

Jiminy Christmas, Holy Hanukkah and Super Kwanza ァ finding undervalued, high-yielding equities that should maintain or increase their dividends and maintain or improve their market values is as difficult today as performing brain surgery while wearing snow mittens. As you know from column recommendations made between mid-2008 and the third quarter of 2009, it was a shoo-in. A pessimist would say that the early bird gets the worm, and I agree. However, an optimist might suggest that the second mouse gets the cheese. There are still a few undervalued issues hidden behind the trees in the forest, but one has to be a Davy Crockett or a Daniel Boone to hunt them down. So I positioned my petard, donned a coonskin cap and unsheathed my Bowie and here's what I found.

Glimpse CHEROKEE, INC (CHKE-$16.19), a small $40-million revenue company with 8.1 million shares outstanding and pays a $2 dividend that yields 9.4 percent. CHKE licenses brands and trademarks for footwear and accessories such as SideOut, Carol Little, St. Tropez-West, Chorus Line, Molly Molly and All That Jazz. It holds 18 licenses and has a strategic agreement with Target. Best of all, this 20-employee company has net profit margins of 38 percent, free cash flow of $12 million and zero debt. The stock traded in the high $30s and $40s for years before the market crashed; its 52-week range is $25 to $12.

VECTOR GROUP (VGR-$13.56) pays a $1.60 and yields 11.8 percent. VGR makes and sells cigarettes in the U.S. It produces 180 combinations of length, style and packaging under the Leggett, Grand Prix, Eve, Pyramid and USA names. This $411-million revenue company has net profit margins of 5.74 percent, a solid 2.6 current ratio ($4 per share in cash), free cash flow of $7 million and before the market crash, its shares typically traded between $17 and $20 per share. VGR has paid a yearly 5 percent stock dividend since 1999 and its trading range in the last 52 weeks has been $11 to $17.

MEDALLION FINANCIAL (TAXI-$7.80) originates, acquires and services loans that finances taxi cab medallions. This $45-million revenue company has 18 million shares outstanding, paying a 76-cent dividend that yields 9.5 percent. TAXI has a 21 percent net profit margin, a $10 book value and free cash flow of $8.7 million. Prior to the crash, TAXI traded between $10 and $14, and its 52-week range is $3.20 to $9.60.

Finally, ALASKA COMMUNICATIONS (ALSK-$6.80) runs a wire line and wireless communications system in Alaska that lets Alaskans to talk with friends and family in Zimbabwe, Peru, China, Australia and other folks in every nook and cranny in the lower 48 plus Hawaii. This $389-million revenue company pays an 86-cent dividend that yields 12.1 percent and has net profit margins of 5.7 percent. Prior to the crash, ALASKA traded between $8 and $11, and the 76-cent dividend has been raised each year since it was declared in 2004.

Even though the dividends look secure and even though I think their prices may rise modestly over the next few years, please remember that these issues are only suitable for investors who are comfortable with slightly more than modest risk.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.

ゥ 2010 Creators Syndicate Inc.

Published: Fri, Feb 19, 2010