Cramer's Mad Money - Will Capital Spending Trump Verizon's Dividend? (2/23/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 23.
Editor's Note: Until February 26th, Jim Cramer will be broadcasting "Mad Money High Noon" which will air midday. There was no Lightning Round segment yesterday.

John Killian, Executive VP and CFO of Verizon (NYSE:VZ)

Verizon (VZ), with its 6.5% yield, is one of Cramer's top dividend picks, but with the company's plans to spend $17 billion on building its network, in addition to the cost of expanding FiOS to television and waging wars with cable companies, will capital spending steal fire from its dividend? Killian said cash flow determines the rate of Verizon's dividend and he doesn't see any obstacles to paying a generous yield. Killian added Verizon's efforts in building its network will solve many of its other problems, so there is no need to expand capital expenditure beyond the current level. Verizon is rolling out LTE, the next generation of high speed, high capacity data, and Killian says Verizon is in a perfect position to prosper in the wireless future.

CEO Interview: Aubrey McClendon Chesapeake Oil (NYSE:CHK)

While Chesapeake (CHK) reported a strong quarter last week, the stock is mysteriously up only $1 since then. CEO Aubrey McClendon discussed the company's plans to increase drilling over the next two years with unconventional and advanced technology. McClendon reaffirmed his commitment to natural gas which he thinks may gradually replace dirty fossil fuels. He dismissed rumors that natural gas drilling pollutes the water supply and is hopeful concerning the alternative fuel's future. Cramer is bullish on Chesapeake.

Consumer Confidence and Washington: Home Depot (NYSE:HD), Toyota (NYSE:TM), Goldman Sachs (NYSE:GS)

Consumer confidence numbers were low for February and Cramer says the blame does not lie with Toyota's recall (TM) or Goldman Sachs (GS) bashing, but with Obama's push for healthcare reforms. Employers, who have just brought their companies through a recession, are now having to calculate how much these healthcare reforms will cost them, and may decide it is not time to hire, and it may even be time to fire. While healthcare reforms are well-intentioned, Cramer thinks employment reforms should come first.

However, the picture is not entirely gloomy for retail. Home Depot (HD) blew away its numbers and raised its dividend. So even while consumer confidence may seem gloomy, Home Depot proves that the right companies can encourage even skeptical consumers to spend money.

Headlines versus the Charts: Boeing (NYSE:BA), Caterpillar (NYSE:CAT), Terex (NYSE:TEX), U.S. Steel (NYSE:X), AK Steel (NYSE:AKS), KB Homes (NYSE:KBH), Pulte Homes (NYSE:PHM), Brookfield Properties (NYSE:BPO), Simon Properties (NYSE:SPG), Lennar (NYSE:LEN)

According to the headlines, housing is terrible, foreclosures are up, mortgages are in trouble and airlines are headed down. However, the charts tell a very different story. In fact, Boeing (BA), Caterpillar (CAT), Terex (TEX), U.S. Steel (X), AK Steel (AKS), KB Homes (KBH), Pulte Homes (PHM), and Lennar (LEN) are “going on pretty strong.”

While the prophets of doom are lamenting commercial real estate's future, Brookfield Properties (BPO) and Simon Properties (SPG) are fighting over General Growth Properties. In this declining sector, M&A activity is almost unheard of.

The bottom line, read the tape, not the headlines of “pessimistic articles or stories that twist the facts in order to be negative," said Cramer.


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