I recently spotted a high yield dividend play whose technical setup is of top quality. This company is Companhia Siderurgica Nacional (NYSE:SID).

The company’s mission is to increase value for its shareholders by maintaining the Company’s position as one of the world’s lowest-cost steel producers. It produces carbon steel, which is the world’s most widely produced type of steel, representing the vast bulk of global steel consumption. From carbon steel, the Company sells a variety of steel products, both domestically and abroad, to manufacturers in several industries. Its products are sold both domestically and abroad as a main raw material for several different manufacturing industries, including the automotive, home appliance, packaging, construction and steel processing industries. The three principal export markets for its products are North America, Europe and Asia, representing 34%, 26% and 28%, respectively, of the Company’s export sales volume in 2005. (Source: Bigcharts)

(Source: Bigcharts)

In running the initial screen, I placed emphasis on stocks that met the following criteria:

• Market Capitalization >= 500,000,000
• Average Daily Volume Last Quarter >= 80,000
• Current Annual Dividend Yield between 5-12%
• Return on Equity >= 10%

Now, this is does not share much in terms of investment secrets or the entire analysis conducted, but it does serve to provide a certain minimal level of quality in the stocks we look for. In this case, Companhia Siderurgica Nacional (SID) met our screener constraints and technical criteria. In fact SID’s current statistics look like this:

• Current Price Per Share = $30.72
• Market Capitalization = 8,284,471,000
• Average Daily Volume Last Quarter = 821,668
• Current Annual Dividend Yield = 10.60%
• Return on Equity = 52.83%

(Source: MSN Screener Deluxe)

From looking at this chart, you can clearly see that the stock is on a strong upward trend that I believe will continue for some time. The two solid trend lines represent the expanding channel of support and resistance. If you look historically at the MACD indicator which is placed just below the chart, you will find that the stock is oversold. I have circled two specific areas over the past three years where the stock bottomed out in line with an oversold MACD. More recently, it looks as if we are heading in the same direction. Keep in mind that this play has stability, great potential for price appreciation, and an annual payout of 10.60%. Also, the trend is your friend!

Our Recommendation: In this play, you should place a stop-loss just below the horizontal support line near the $25.75 region. Begin taking profits off the table near $45 per share

Good Investing…