“The business is declining, with new competitors and technological trends that could eventually destroy the industry. Many companies have better growth prospects. But even with all those problems, you might think that a 21 percent dividend would entice investors,” writes Floyd Norris in today’s New York Times.

“That amazing yield is available now on a new security that carries a household name: MCI. The number is that high because Wall Street is bored with a simple thing like yield and because there are doubts that the company can continue to pay the dividend forever. But you don’t need forever to make money with income that high.”

“MCI’s new stock is a tracking stock issued by WorldCom, which merged with MCI a few years back. The stock is supposed to track the performance of MCI’s business, largely consumer and small-business long-distance service, and it sports a $2.40 annual dividend.”

“When the shares began trading in June at around $18, that produced a yield of 13.3 percent. Now, with the stock down to $11.18, the yield is 21.5 percent.”

“This stock exists because WorldCom wanted to spice up investor interest after its planned merger with Sprint fell apart and its own stock plunged. The idea was that WorldCom stock, freed of the stodgy, old long-distance business, would appeal to growth investors, while the new MCI would attract those interested in high dividends.”

“So far, the idea has not worked very well. Since the spinoff, WorldCom is down 28 percent and MCI is off 38 percent. Some question whether MCI can keep paying the dividend. The Baby Bells are getting into long distance and revenues are falling. Virtually no one seems to like MCI.”

“Is the dividend safe? Yes, says Bernard J. Ebbers, WorldCom’s chief executive. ‘Investors should be confident of our ability to service debt and pay the $2.40 dividend for the foreseeable future,’ he said last month.”

“Of course, the board can cancel the dividend when it wants to. But there is a good reason the dividend is probably safe: Mr. Ebbers needs the money, and the board seems determined to do what it can for him.”