Mad Money Recap

Return to Article

Cramer's 'Mad Money' Recap: Stick With High-Yielding Stocks

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

"Cash is no longer king," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

With every Federal Reserve interest rate cut, cash becomes a less and less attractive place to invest in, Cramer said. "You'd be insane to keep your money in CDs or savings accounts at these rates."

The new "king" of investments, according to Cramer, is high dividend-yielding stocks.

His favorite in this group is electric utility ConEd (ED Quote). ConEd, he says, "is the single best electric utility in the nation." He noted that ConEd has a 5.7% yield and just raised its dividend again in January.

Cramer said high-dividend paying stocks are appealing for several reasons. First, their dividends yield more than the current rates for cash-based investments. Second, the tax rate on dividends is significantly less than the capital gains tax rate paid on interest income. And third, investors get the upside potential of the stock, something CDs, money markets and savings accounts can't offer.

In the case of ConEd, the company just recently reported 76 cents a share of earnings, beating estimates by a massive 15 cents a share. Cramer says ConEd is also attractive because it's not economically sensitive and is often considered a "recession-proof" company that investors flock to when the economy turns sour.

Cramer once again recommended buying gold, oil and agriculture stocks, but he said for a safe, recession-proof stock, investors also need to consider ConEd.

A Stock With a Big Dividend

Cramer highlighted US Energy Trusts as a second high dividend-yielding investment idea. Energy trusts, he pointed out, do not receive a lot of attention on Wall Street, but they pay out huge dividends, mainly because they don't pay taxes on their earnings.

Cramer's short list of energy trusts included Permian Basin Royalty Trust (PBT Quote), BP Prudhoe Bay (BPT Quote), San Juan Basin (SJT Quote) and Hugoton Royalty Trust (HGT Quote).

Of the four, Cramer ranks Permian Basin Trust as the best.

Cramer said he favored Permian Basin for several reasons. First he pointed out that the trust is diversified, with 59% of its operation in oil and the other 31% in natural gas.

Second, Permian Basin operates mainly in Texas, a friendly place to drill for oil and gas. Finally, Cramer said Permian Basin has nine years of reserves left in the trust. "This makes (it) a safe place to invest for at least the next three to four years."

Cramer said Permian Basin is also predictable. Even if oil prices go lower, he predicts the trust's dividend will still be "impressive." Permian Basin currently yields just over 12%.

An Outrageous Pay Package

Cramer expressed outrage at Washington Mutual's (WM Quote) Chairman and CEO Kerry Killinger and 100 other executives who were given attractive compensation targets by the company's board of directors.

According to the Wall Street Journal, the board voted to shield the compensation targets from some costs from mortgage losses and foreclosures when bonuses are calculated later this year. Cramer was disgusted with the action because it comes at a time when the company teeters on the brink of insolvency.

Cramer called the board's actions "shameful" and added the entire board to his "Wall of Shame."

"How can you people live with yourselves," he asked, while noting that the proposed bonuses for Killinger will range between 365% and 548% of the CEO's base salary for the year.

Cramer urged Washington Mutual shareholders to hold the company's board accountable for their actions.

Mad Mail

In this segment, Cramer told a viewer that he wouldn't recommend buying Seagate (STX Quote), saying he's not a fan of any technology stock.

Am I Diversified?

Cramer played "Am I Diversified?" with callers to find out if their portfolios are right for this market.

The first caller's portfolio included Barrick Gold (ABX Quote) Humana (HUM Quote) McDonald's (MCD Quote) Altria (MO Quote) and Honeywell (HON Quote).

Cramer, who owns both McDonald's and Altria for his charitable trust, Action Alerts PLUS, blessed this portfolio as diversified.

The second caller had American Commercial Lines (ACLI Quote), Steel Dynamics (STLD Quote), Google (GOOG Quote), Apple (AAPL Quote) and Ebay (EBAY Quote) in his portfolio.

Cramer identified "three of a kind" with Apple, Google and Ebay and recommended adding a defense, healthcare and tobacco stock to the list.

Lightning Round

In the Lightning Round, Cramer was bullish on Oracle (ORCL Quote), Salesforce.com (CRM Quote), Caterpillar (CAT Quote), Global Industries (GLBL Quote), Willbros Group (WG Quote), Ametek (AME Quote), Hudson City Bancorp (HCBK Quote), Spectra Energy (SE Quote) and Duke Energy (DUK Quote).

Cramer was bearish on Pfizer (PFE Quote), Buffalo Wild Wings (BWLD Quote) and Nvidia (NVDA Quote).

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

For more of Cramer's insights during the Lightning Round, click here.