Cramer's Stop Trading! Out of Bonds (12/9/10)

 |  Includes: DD, KMP, LINEQ, MO, PCL, T
by: Miriam Metzinger

Stocks discussed on Jim Cramer's Stop Trading! TV Segment, Thursday December 9.

Linn Energy (LINE), Kinder Morgan (NYSE:KMP), AT&T (NYSE:T), Plum Creek Timber (NYSE:PCL), DuPont (NYSE:DD), Altria (NYSE:MO)

With the rally in the 30 year Treasury, Cramer would use the opportunity to lighten up on bonds and find good yielding stocks as a better return on investment. A group of four dividend stocks Cramer recommended in March, AT&T (T), Plum Creek Timber (PCL), DuPont (DD) and Altria (MO), are up 16% for the period and 20% if dividends were reinvested compared to a 12% gain in the S&P 500 and a mere 4% rise in bonds, and this doesn't even calculate the superior tax treatment for dividends compared to bonds. Cramer thinks government will continue to be tax-friendly to dividends.

A few dividend stocks Cramer has recommended lately include Linn Energy (LINE) with a 7.1% yield and Kinder Morgan Partners (KMP). Those who worry about risk from stocks compared to bonds might be concerned that Linn might not always be able to hedge its energy costs (although Linn is "unbelievable at hedging" according to Cramer), or the decline in natural gas may hurt Kinder Morgan (but the company's revenues are fee-based and are somewhat insulated from the fluctuations in natural gas prices).

Even with the risks, high-yielding stocks are still superior to bonds in an environment of rising interest rates.


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