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September, 2005


People typically invest in bonds, bond mutual funds, or bond exchange traded funds (ETFs) for two reasons: as a stabilizing hedge against the potential loss of capital associated with downturns in the equity markets, especially growth stocks; and as a source of income. But bonds today are at risk due to rising interest rates and possible inflation, both of which tend to result in a reduction in bond prices, and hence in the investor's principal.

Since taxes on both stocks' capital gains and on most equity dividends have been lowered, the historical returns of stocks have been superior to those of bonds, and stocks with high dividends are bond-like in offering less volatility than the average growth asset while nonetheless providing yields often competitive with those of bonds, but stocks held for the long-term, unlike bonds, sometimes will show substantial increases in their yield amounts over time, relatively high dividend paying equity securities may now be replacing bonds as the safer, income producing assets of choice.

Here are 5 high yielding stocks that seem attractive now:

Friedman IndustriesFRD4.50%39.00%9.500.00
Programmer's Paradise, Inc.*PROG5.20%24.00%6.600.00
Grupo Casa Saba, S.A. (ADR)*SAB4.70%16.00%7.500.00
Ultrapar Participacoes, S.A. (ADR)*UGP4.00%25.00%7.300.16
Wellco Enterprises, Inc.*WLC5.30%46.00%7.400.02
(The statistics are as of the market close on 9/2/05.)

(*These meet both Ben Graham low P/E and high dividend value criteria. They also meet his safety test due to relatively low debt to equity. Such assets, as a group, have performed at an annual compound return average of 18.5% or better, per long-term "backtesting" by Graham and his associates.)


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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