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Dividend Stock Grab Bag: Ericsson and Carnival Cruise Lines

For those of us old enough to remember, there was a time when Ericsson (ERIC) was a leader in the cellphone business

My first cellphone was a Motorola StarTAC – one of the old-style flip phones, back when the only thing you could do with a cellphone was (the horror!) make phone calls.

And Ericsson was right there with Motorola, battling for sales supremacy of the then-new technology.

But both of those former leaders in the mobile device arena are trading today at a mere fraction of their former values.

In Ericsson’s case, it’s trading for about one-tenth of its former stock price, down from over $130 per share in 2000 to under $14 right now.

But its fall from grace has also meant an escape from the mobile device business, as the company sold off its last interest in the Sony Ericsson cellphone partnership in 2012.

So, considering it shed the dead weight of ailing mobile business, what’s the problem today?

To be sure, Ericsson has the resources to still be competitive, and it is, in a marketplace that includes equipment and services for mobile and fixed network operators, network solutions, global services and support solutions.

Further, it’s still a huge company with money to burn on acquisitions.

But does that mean it’s worthy of adding to your holdings?

Ericsson is up almost 60% in the last 12 months.

In fact, it’s bumping up against the highest it’s been since 2007 – highs that it’s failed to surpass twice before.

Long story short, it’s unlikely to break through that resistance this time around.

The company is viable, but the stock’s price is due for another correction. And with a mere 2.87% dividend (one that it didn’t pay in 2012), I have to recommend looking elsewhere in the telecomm industry.

Cruising for Income

Carnival Cruise Lines (CCL) hit a rough patch recently, most notably thanks to a fire at sea on one of its ships about six months or so ago.

The very idea of a fire on a ship at sea is enough to cancel ticket sales, but let’s be realistic…

Statistically, a fire on a ship, one that causes fatalities, is less likely to occur than any of us having a fatal automobile accident.

Yes, that’s a little morose, but it’s also realistic. People don’t fly because of concerns for their safety, even though flying is safer than driving down the freeway to get to work…

And believe it or not, most of Carnival’s target market understands that. The company is growing, and has plenty of room to grow.

You see, despite the volume of advertising calling our attention to cruising, most Americans, about 75% of those who could, have yet to do so…

As such, there are plenty of untapped sales for Carnival.

Further, Carnival has a long history of dividend payments, with the glaring caveat that it   suspended its dividend in 2009.

But for the last three years, Carnival has been reliably paying $0.25 per share, per quarter. And that dividend gives Carnival Cruise Lines an attractive 3.06% dividend yield.

Like Ericsson, Carnival is far from its pre-financial crisis highs, but unlike Ericsson, Carnival hasn’t yet hit its peak.

Safe investing,

Steve Gunn