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Don't Bottom-Fish for Fannie Mae and Freddie Mac

Fannie Mae



Freddie Mac


are hot topics lately in many financial discussions. The infatuation with these two stocks reminds us of last summer when

Countrywide Financial

began dropping.Back then, many people in the real estate industry, constantly waiting for a buying opportunity and a quick bounce, asked us if $30 was the right level to buy Countrywide, now a subsidiary of

Bank of America

(BAC) - Get Bank of America Corp Report

. They then asked if $20 was the right level, then it was $15, then $10, until suddenly the subject never came up again.

This situation seems eerily similar to what has happened with Fannie Mae and Freddie Mac. Go back to our post on July 11 , and you'll see we felt no attraction to either of the names, even after the stocks rebounded shortly after their initial sizable drops. As ratings get slashed, and negativity toward the two companies builds, it seems inevitable the mortgage finance giants will require a lifeline from the government or shareholders, either of which may be tough to come by.

We feel it would be foolish to take a shot at the ultimate in bottom-fishing these days. The $5 stock "Mendoza" line (baseball fans know the term as batting averages that fall under .200) for mutual funds needs to be recaptured - and sustained - before there is any hope of a potential comeback for these two home lenders. As we say often, there are several other areas that offer better investment opportunities at this time.

Fannie Mae and Freddie Mac aren't recommended dividend stocks, with both holding a rating of 1.9 out of 5 stars.

Now Who's Buying Lehman Brothers?

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TheStreet Recommends

Lehman Brothers


is rising Friday on the latest rumor that buyers may be lining up at the gate for the troubled financial services company.

There was a Financial Times story Thursday that said Lehman discussed the sale of a 50% stake with

Korea Development Bank

or China's

Citic Securities

, but failed to reach agreement because both companies felt the asking price was too high. Reuters reported Citic denied such talks had taken place.

Analyst Richard Bove raised his rating on Lehman to "buy," claiming the company is a candidate for a hostile takeover. He feels the company could fetch somewhere around $20 a share. (At the time of this article, the stock was trading around $15.50).

Lehman Brothers has had to deal with its share of bad rumors for months, and this positive news is a welcome change for the company.

We still wouldn't try to bottom-fish in the stock at this time. There are still plenty of questions remaining about the franchise's true value, and we just don't see the point of playing with such a volatile stock. Lehman's Neuberger Berman franchise is the gem within the company, but how the company unlocks that value remains to be seen. The company has a dividend yield of 4.96%, based on Thursday's closing price of $13.72. We're not sure if the dividend is even a factor worth considering at this point, as it probably isn't sustainable at its current level.

Lehman Brothers isn't a recommended dividend stock. It has a rating of 2.7 out of 5 stars.

Nordson Crushed by Huge Earnings Miss


(NDSN) - Get Nordson Corporation Report

surprised Wall Street with earnings and revenue below analysts' estimates. Revenue rose 12% to $288.4 million, but was below the consensus estimate of $298.4 million. Earnings were 5 cents a share below expectations.

Sales increased 20% in the company's adhesive dispensing segment and 18% in the advanced technology segment. But sales fell 18% in the industrial coating and automotive segment. The company produces precision dispensing equipment that applies adhesives, sealants and coatings to a range of consumer and industrial products during manufacturing operations.

The company forecast earnings for next quarter of 84 cents to 94 cents a share, below analysts' earnings estimates of $1.05.

So far the reaction from investors Friday isn't pretty. At the time of this article, Nordson shares were down almost 25%. We are removing the stock from our recommended list. There's reason to stick around at this point. The company's dividend yield is 1.02%, based on Thursday's closing stock price of $71.77.

Nordson isn't a recommended dividend stock. It has a rating of 3.3 out of 5 stars.

Foot Locker Surprises Investors with Impressive Earnings

Foot Locker

(FT) - Get Franklin Universal Trust Report

delivered impressive quarterly earnings Thursday, topping earnings estimates by 8 cents a share, even though revenue rose just 1.5% to $1.3 billion.

The company did a good job with inventory management, as merchandise inventory at the end of the second quarter was 3.5% lower than a year earlier. The company said it estimates full-year earnings in the range of 70 cents to 85 cents a share. Analysts estimate earnings of 72 cents.

We've liked the company since June when we recommended it at $13.97. This quarter was good for Foot Locker, but not spectacular. The company does offer an attractive dividend yield of 3.93%, based on Thursday's closing price of $15.28. We would let the stock settle a bit here, not chase it, and instead look for a pullback to add to positions.

Foot Locker is a recommended dividend stock, holding a Rating of 3.5 out of 5 stars.

Gap Stores Earnings Solid, but Revenue Misses

Gap Stores

(GPS) - Get Gap, Inc. Report

reported better-than-expected earnings Thursday but revenue fell 5$ to $3.5 billion, which was short of estimates.

The company controlled inventory and expenses, which helped gross margins jump by 3.9 percentage points to 38.2%. The company has plans to close some of its Gap stores, and consolidate its Kids and Baby Gap chains into the Gap Adults and Body chain.

The stock has been dead money for the last five years, and we still don't see much of a reason to get excited. We would avoid the stock. The brand is well-known, but its appeal to teens has been steadily eroding. If the company can figure out how to appeal to teens again, like it did during the mid- to late-1990s, it could get interesting. The company has a dividend yield of 1.79%, based on Thursday's closing price of $19.01.

Be sure to visit our complete

recommended list of the Best Dividend Stocks

as well as a

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Gap isn't a recommended dividend stock, holding a rating of 3.4 out of 5 stars.

At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Visit for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.