In a volatile market like this, Cramer likes stocks that pay you to wait.
However, not all high yielding names are a good bet, he said Monday. Take Veolia Environnement , which has a 12.5 percent yield. The “Mad Money” host was asked about the company last week, and had promised to do his homework. Well, after doing just that, Cramer said this is a name he would “sell, sell, sell.”
He called Veolia, an international provider of environmental services to municipalities and industrial clients, a “genuine battleground stock” because analysts can’t agree on it. Morgan Stanley called it too dangerous to buy a few weeks ago, but on September 19th Citigroup rated it a ‘buy.’
Veolia announced a big restructuring in August, when it also reported disappointing first-half results. Citigroup thinks once that restructuring is done the cost savings and improved strategic positioning will drive the stock higher.
Cramer, however, thinks it could take a long time for the restructuring to happen. And when it happens, we don’t know if it will work.
In the interim, he said, the size of the problems Veolia is facing is “staggering.” The company has warned on profits and has given little clarity on what the earnings will be going forward. What’s more, it gets about 80 percent of its revenues from Europe.
“You’ve really got a double-dose of uncertainty here, first at the company level where there’s zero visibility meaning we can’t see how much money Veolia will make in the future,” Cramer said, “and then again on the macro level from the possibility of a serious European recession."
And don’t get too attached to the sky-high yield, he warned. He thinks there is no way Veolia will be able to maintain their current annual payout. The company recently announced it will payout just 50 to 60 percent of its earnings to shareholders, down from the current 100 percent payout ratio.
If Veolia gets its act together, Cramer thinks it could be a “decent” stock. But he said that “if” is too risky right now.
“In uncertain times, you need to own certain companies,” he said, “and the only thing that’s certain about Veolia is that the dividend needs to be cut.”
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