<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (June 5, 1998) -- Despite a strong Dow move today, General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %>, a frequent tenant in our high-yield Dow rankings, was pushed back roughly one percent today as the United Auto Workers walked out at a Flint, Michigan parts plant this morning.

The dispute is over some $300 million in investments and the company's wish to cut jobs in the areas where large cars are not selling well. About 3,400 workers went on strike today in a move that analysts fear could shut down as much as 55% of the company's North American production in just a few days. Negotiations are scheduled to resume tomorrow morning.

Despite today's news, General Motors has been one of the high-yield leaders in 1998. After bottoming out in early January at just over $56 a share, the stock has rebounded more than 32% since and is trading now in the mid $70s.

General Motors is a bit of an anomaly when it comes to dividends, however, and one research group working with the Dow high yielders (the American Institute for Economic Research in Great Barrington, Mass.) opts to skip GM altogether when it's in the rankings. Their reasoning is that when GM is having tough times, it acts on a European dividend model and reduces the payout.

The theory that makes the Dow approach so consistent is predicated on the stability of the dividends for the Dow industrials. General Motors and Alcoa <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AA)") else Response.Write("(NYSE: AA)") end if %>, which pays a base dividend but then links the rest of its annual dividend directly to EPS performance, don't follow the normal Dow pattern regarding payouts. Historically, when GM has been in the high-yield rankings, it hasn't performed particularly well because it often cuts its dividend.

Nevertheless, in 1998 (so far), General Motors has been a standout stock after appearing in the high-yield rankings. If the strike is short-lived, the damage may be minimal, but if the walkout ripples across the country to other plants, or lasts a while, GM might be racing up the high-yield rankings again soon.

Have a Foolish weekend!

Current Dow Order | 1998 Dow Returns

[Robert Sheard is the author of the The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and your local bookseller.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   +   1/8   50.00 
 IP   -   3/16  47.44 
 MO   +2  1/2   38.75 
 EK   +   9/16  69.56 
  
 
 
                    Day   Month    Year 
         FOOL-4   +1.49%   0.83%   7.40% 
         DJIA     +1.88%   1.55%  14.28% 
         S&P 500  +1.74%   2.11%  14.78% 
         NASDAQ   +0.73%   0.23%  13.54% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  291 Union Carb    42.94     50.00    16.45% 
  12/31/97  206 Eastman Ko    60.56     69.56    14.86% 
  12/31/97  289 Int'l Pape    43.13     47.44    10.00% 
  12/31/97  276 Philip Mor    45.25     38.75   -14.36% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  291 Union Carb 12494.81  14550.00  $2055.19 
  12/31/97  206 Eastman Ko 12475.88  14329.88  $1854.00 
  12/31/97  289 Int'l Pape 12463.13  13709.44  $1246.31 
  12/31/97  276 Philip Mor 12489.00  10695.00 -$1794.00 
  
  
                              CASH    $415.96 
                             TOTAL  $53700.27