Year-to-date, General Electric is the worst-performing stock in the Dow, down 22.3%. Meanwhile, TEPPCO is up 69%, including dividends.

(If any of you took me up on my income investment recommendation, e-mail us and let us know how you did at comments@investmentu.com.)

Of course, part of the move higher for TEPPCO can be attributed to news that Enterprise Products Partners (NYSE: EPD) is buying the company, as I predicted.

For those of you that purchased the stock, I recommend you take profits now. And whatever you do, don’t reinvest them in GE.

GE: Reasons Why It’s Not a Safe Income Investment

My reasons for disliking GE as a safe income investment remain the same.

The company defies the golden rule of income investing – go with simple businesses, because simple businesses make money and can pay dividends, consistently.

Remember, GE’s business is all over the place with sales in water, security, railroads, oil and gas, media and entertainment, lighting, health care, consumer lending, commercial lending, energy, electrical distribution, consumer electronics, aviation and finally (drum roll) appliances.

And it’s only getting more complicated. This week, the company announced it’s getting involved with embryonic stem cell research.

Another problem? GE will always be fighting the law of large numbers. At a market cap of $125 billion, it takes an awful lot of growth to move the earnings needle and in turn, share prices.

Right now, that’s not happening.

Income Investing: The Smart Way to Pick Dividend Stocks

Again, it’s not fair of me to bash GE without offering up an alternative. So here it is: Windstream Corp. (NYSE: WIN).

The company is the country’s largest rural wireline telecommunications company. It was formed in mid-2006 through the combination of ALLTEL’s wireline business with VALOR Communications Group.

It operates in 16 states… in the sticks! Off-the-beaten-path markets, where big carriers like AT&T and Verizon don’t focus because the upfront costs are too high. Just to give you an idea, in most suburban and urban markets the number of access lines per square mile are over 110. In most of Windstream’s markets it’s below 20.

Obviously, this lack of competition confers notable advantages on Windstream. Namely, high and steady profit margins. Even in this declining market, Windstream’s been able to maintain its operating margin of 35%.

Even better, at current prices, the stock yields 12%. (In comparison, GE currently yields 3.4%).

Here are the four main reasons I believe this dividend is safe:

• Wide Economic Moat. Many carriers are losing traditional phone customers to cable phone services. However, Windstream is partially insulated from this trend. About 30% of its customers don’t even have the option to get cable modem services. The cable companies just don’t serve those markets. At the same time, the severities of this recession are forcing many larger carriers to cutback or suspend expansion efforts into Windstream’s territories. The delay only allows the company to solidify its competitive position and minimize the impact of new entrants over the long term.

• It’s Growing for Free. The big old honking stimulus bill included $7.2 billion in funds for Internet expansion. Windstream qualifies for the grants and can use the “free” money to expand its footprint in rural markets.

• Solid Cash Flow. In the last year, cash flow improved 14% to $763 million thanks to lower capital expenditures and cost cutting efforts. In 2009 we can expect the same, as management doesn’t anticipate the need to increase capital expenditures.

• Credit is No Concern. Windstream’s got a sizable $5.4 billion debt balance, but it’s reasonable relative to cash flows (interest expense should consume less than 28% of cash flow), lower than the industry average leverage and there’s no immediate need for refinancing. The earliest debt maturity is in 2011 for $457 million. If necessary, the company could pay off the balance from current cash flows and the money in the bank. After that, the next significant debt maturity doesn’t come until 2013.

Like TEPPCO, Windstream comes with a kicker – it’s also a takeover target.

In the last five years we’ve seen larger carriers, eager to juice growth, acquire rural carriers with high margins for a hefty premium. Windstream possesses the same qualities of past takeover targets, so a deal is certainly possible in the next six to nine months. A cheap valuation, at just 9.5 times forward earnings, increases the odds.

Bottom line, Windstream provides reliable income and the potential for significant capital appreciation like we witnessed with TEPPCO. Sadly, we can’t say the same about GE. So dump it if you own it! And Buy Windstream instead.

Good investing,

Lou Basenese

Source: Need an Income Investment? Keep Dumping GE and Buy this Stock Instead

• A federal judge gave no leniency to convicted Ponzi schemer Bernie Madoff yesterday (Monday), sentencing him to 150 years in prison. U.S. District Judge Denny Chin described Madoff’s crime as “extraordinarily evil” and said that it was “not merely a bloodless crime that takes place on paper but one that takes a staggering human toll.” As a part of his sentence, the 71-year-old Madoff was ordered to forfeit a total of $170.8 billion which represents the total proceeds of and property involved in certain of his crimes.

• Pipeline operator Enterprise Products Partners L.P. (NYSE: EPD) will buy Teppco Partners L.P. (NYSE: TPP) for $3.3 billion, forming the biggest U.S. energy partnership, Bloomberg News reported. Teppco shareholders will get 1.24 units of Enterprise for each one they own, making the deal worth 15% more than when the initial offer was made in March. Enterprise will see the benefits of the takeover starting next year and will net a minimum of $20 million in cost savings, according to Enterprise Chief Executive Officer Michael Creel.

• Apple Inc. (Nasdaq: AAPL) Chief Executive Officer Steve Jobs returned to work as promised following a near six-month leave of absence in which he received a liver transplant. Initially, Jobs will spend a few days a week at Apple’s Cupertino, Calif. Headquarters and work the other days from home. Investors will be reassured that Jobs is back, Collins Steward Ashok Kumar told Reuters. “In many ways he’s irreplaceable,” Kumar said. “Having him back brings the halo back to the company.” Apple shares closed at $141.97 yesterday (Monday), down 0.33%.

• General Motors Corp. (OTC: GMGMQ) cut its ties to a northern California auto plant it operated with Toyota Motor Corp. (NYSE ADR: TM) since 1983, Reuters reported. The move puts into question the fate of more than 4,000 jobs at the plant that was once seen as a ground-breaking experiment in bringing production efficiencies pioneered in Japan to a U.S. workforce. “While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota,” Toyota said in a statement. The soon-to-be defunct Pontiac Vibe, Toyota Corolla and Matrix are manufactured at the facility.

• The U.S. Interior Department yesterday (Monday) designated roughly 670,000 acres of land as potential areas for solar energy production with the hope it will speed up the development of renewable energy resources on federal lands. “This environmentally sensitive plan will identify appropriate Interior-managed lands that have excellent solar energy potential and limited conflicts with wildlife, other natural resources or land users,” Interior Secretary Ken Salazar said in a statement. The 24 areas on the land could generate nearly 100,000 megawatts of solar electricity, the DOI said. President Barack Obama has allocated $150 billion to renewable energy investment over the next 10 years.

• Oil for August delivery rose to $2.33 to settle at $71.49 a barrel after China said it would increase oil reserves and Nigerian militants partly shut down an offshore oil platform that belongs toRoyal Dutch Shell plc (ADR NYSE: RDS.A, RDS.B), The Associated Press reports. China plans on increasing its strategic crude oil reserves by 60%, providing the market with some long-term support according to Alaron Trading Corp. analyst Phil Flynn.

• The Chinese government has stopped its metal stockpiling program, a top official told state-run Caijing Magazine. China has so far amassed 590,000 metric tons of aluminum, 159,000 tons of zinc and 235,000 tons of copper. The news could push down prices of metal in the near-term, though a stimulus-driven revival in demand could limit the fall, the report said.

Source: Investment News Briefs Tuesday, June 30, 2009