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France Telecom SA (ADR) (FTE), Annaly Capital Management, Inc. (NLY): Are These Dividend Companies Financially Strong?

Slower growth companies with high dividend yields were once considered attractive investments because of low returns on government debt and comparatively lower interest rates driven by central banks. But it seems this trend has come to an end. Recently, the U.S. Treasury bond reached its 13-month high. An improvement can be seen in the U.S. economy, as the Federal Reserve continues investing nearly $85 billion a month on bonds and mortgage-based securities. This has caused investors to stray from dividend-paying stocks to treasury bonds. Let’s see if these high-yield stocks will still be able to attract investors.

France Telecom SA (ADR) (NYSE:FTE)New tariffs with cost savings

The France Telecom SA (ADR) (NYSE:FTE) Orange brand services 49% of fixed broadband customers (who also purchase mobile services) in Spain. With the launch of the Canguro plan in April, it plans to extend its lower average revenue per user, or ARPU, customer tiers. Its Canguro 45 plan provides 1000 minutes of mobile calling, unlimited SMS, and 1GB of mobile internet at 20Mbps DSL speed. Comparatively, Telephonica’s Fusion plan provides 550 minutes of mobile calling, unlimited SMS, and 1GB internet at 10Mbps DSL. Telephonica is selling this plan at 49 euros, making it less attractive than Orange’s Canguro.

France Telecom SA (ADR) (NYSE:FTE) plans to launch 4G services in Spain by July 2013, 10 days prior to its competitor Yoigo’s LTE release. Presently, Orange is ranked third in the telecom industry in Spain. By launching its 4G services in six of the biggest cities of Spain, it will strengthen its position in the market. It also plans to enter 9 more cities later this year, and all capital cities by 2015.

In the first quarter of 2013, there were regulatory price cuts, which played a major role in eroding 40% of the declined EBITA. The company reported a 0.6% increase to its labor cost of $18.25 million in the first quarter of 2013. This includes a 1.8% increase in salaries represented by the ”Part-Time for Senior Plan.” This has helped reduce political pressures on re-hiring of new employees in large numbers. Headcount reduction has been increasing since last year. There will be a further rise in headcount reduction in 2015 with the retirement of senior citizens in the company. Through these prospects, the company was able to reduce costs by $285.49 million in the first quarter, compared to $75.61 million in fourth quarter of 2012. It plans to achieve $782.16 million by the end of 2013.

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