Dividend growth has been erratic. Southern Copper made an unusual move by cutting the cash dividend in last year's fourth quarter and adding a stock dividend. With the stock dividend factored in, the fourth-quarter dividend totaled 54 cents ($2.16 annualized). Southern Copper paid an all-cash quarterly dividend of 54 cents during this year's March quarter, giving the stock a yield of 6.6% at current prices. Cash flow coverage is comfortable at 4.5 times the new dividend rate.

Investment Ideas

Risks to consider: Veolia's plan for improving its balance sheet involves asset sales, but finding buyers could prove challenging if Europe's economy weakens. Permian Basin Royalty Trust owns a finite amount of resources. As these are gradually depleted, distributions will decline and the trust will eventually cease to exist.

Action to take: My top pick for conservative investors is Permian Basin Royalty Trust. The trust pays a generous distribution supported by high-quality, low risk assets. Southern Copper is slightly more risky, but a good choice for investors who want income and leverage to rising copper prices. Veolia is a much more risky pick. Earnings gains are contingent on restructuring, but Veolia offers the highest yield and upside potential.

Lisa Springer does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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