This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Pretty in Pink (Sheets)

NEW YORK (TheStreet) -- Investors shouldn't overlook stocks listed on the Pink Sheets, which has some fine companies despite its sketchy reputation.

Many are foreign companies comparable to industry leaders in the U.S. Some pay high dividends, attractive in a market in which the average yield for a member of the S&P 500 Index is about 1.9%. RWE AG (RWEOY), Swisscom (SCMWY) and J Sainsbury (JSAIY) are three high-yield blue chips on the Pink Sheets that may be appealing to long-term investors.

RWE is a Germany-based conglomerate with a market cap of $22 billion and a price-to-earnings ratio of about 22. It is comparable with General Electric (GE) in its range of operations.

RWE's dividend yield is 6.98%. The yield for GE is 2.79% with a P-E ratio of about 20. RWE is a lightly traded stock with an average volume of fewer than 20,000 shares, compared with GE's average daily volume of 37 million.

Swisscom provides telecom services in Switzerland and Italy, and has a dividend yield of 4.57%. By comparison, AT&T's (T) yield is just over 5%. Swisscom's P-E is under 15, and the company's market cap is over $26 billion. Volume for Swisscom is about 6,000 shares a day, compared with 25 million for AT&T.

Sainsbury has a chain of supermarkets and convenience stores throughout the United Kingdom. Like grocers in the U.S. such as Safeway (SWY) and Kroger (KR), Sainsbury has a slim profit margin. Still, it has a healthy dividend and should have the cash flow to increase its dividend yield from its present 3.90%. Safeway yields 2.4%, Kroger 1.6%.

For long-term investors, the low betas and low volume of many Pink Sheet stocks may be alluring. A study by Russell Investments found that low-beta stocks have the highest returns over time. That makes sense because if a shareholder is pleased with the performance of a company, there is no reason to sell the stock. If no one is selling, then the price movement will be limited, which means the beta will be low.

Low volume for a stock means the market for it can be inefficient as there can be a mismatch between buyers and sellers due to few transactions. So shares may be undervalued because of the lack of liquidity.

Income investors will want dividends that are sizeable and secure. That is certainly the case with RWE, Swisscom, and J Sainsbury. With the stocks' low betas and low volume, investors may find opportune moments to buy that should result rewarding long-term returns due to inefficiencies in the market.

At the time of publication, the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stock quotes in this article: RWEOY, SCMWY, JSAIY, GE, T, KR, SWY 
Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs