Vivian Lewis manages Covestor’s International Yield model, which focuses on high-yield investments in closed-end funds, stocks and preferred shares of companies located outside the United States.
Lewis recently sold Cellcom Israel Ltd. (NYSE: CEL) from the portfolio, so we asked her to share her reasons for moving out of the stock. Her response follows.
We have been worrying about CEL for a while because it is a big dividend payer and there are risks it will have to cut back because its earnings are being squeezed.
Israel has a highly competitive cellphone market and one feature of life in the Jewish state is that because carrier interconnectivity fees are outrageously high, people go around with multiple cellphones to avoid them. The government naturally is trying to force down the fees and has the clout to do so. We had reported on this for a while, usually written by Frida Ghitis, my Latin American reporter who happened to be in Israel this month on assignment for another publication. Last week she was in Amsterdam en route home when I pulled the plug on CEL. What tipped me into selling CEL was this news:
Cellcom Israel Ltd. … [t]he country’s largest mobile-phone operator, was cut to “sell” from “neutral” at IBI-Israel Brokerage & Investments Ltd.
CEL is a sell! (Sorry about the pun.) This news was the trigger, not the cause.
We switched into Telephone of New Zealand (NYSE: NZT),which is not as high a dividend-payer, but a smarter investment at this point, in our view.
“Israeli Stocks: Cellcom, Delek, El Al, Partner Communications” Bloomberg Businessweek, 5/25. http://news.businessweek.com/article.asp?documentKey=1376-LLQM891A1I4H01-611B86V8GGIN6VAMGIAO032QD9