Mad Mail: Pension Payouts and Procter & Gamble

Hey Jim: I bought Enterprise Products Partners for its nice yield, but the most recent dividend came into my account as a dividend, and then a few days later was adjusted to be a return of capital. Should I take this as a sign that EPD can't afford to pay its dividend any longer, or should I just consider it a short-term economic/accounting issue? I thought the tax treatment of dividends wasn't announced until the end of each fiscal year, so my gut reaction was to take this as very negative news. --Summer

Cramer says: “No…it’s a sign of nothing…it comes out as a dividend, but don’t think of anything other than the fact that these stocks have been going down in part because they had a very good first month of the year, but there is no sign of any stress [in] EPD. And Kinder Morgan Partners remains my favorite. But yours is pretty darn good, too. I would be a buyer.”


Jim: With the earning hits and potential insolvency of major corporations and state governments, combined with the recent major drop in security prices in which the pension funds may be invested, how secure are pension payouts to current (and optimistically future) retirees? Will this be the next economic shoe to drop? --Ron

Cramer says: “First of all, no state has ever gone bankrupt. So let’s remember that before we get too panicky. Second, I’m far more concerned about the annuities at several of the major life insurance companies than I am about the pensions for individuals from states. Why? Because the states can raise taxes, the pension annuities cannot because they are private companies. In my list of parade of horribles, that one is really near the end of it…”


Cramer: A few weeks ago you said you couldn't recommend Proctor & Gamble around $60, but if it were to dip to around $53, you would call it a buy. Then, on a more recent episode, you recommended selling PG at around $49. Can you explain your thought process that led you to this conclusion? What made it attractive three weeks ago at $53 and a sell now at $49? --Brian

Cramer says: “What I said was if it went much lower it would be good, and I used $53. And then the company reported an awful quarter…like John Maynard Keynes, I have to change my mind if the fundamentals change. Procter just did not do a good job. And I love the company, but not the stock.”

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