Dear Mr. Berko:

I am 74, retired and live on a pension, Social Security and interest from $210,000 in certificates of deposit. I am considering using $60,000 of my CDs to purchase six utilities because each of them have dividend yields greater than 6.5 percent. They are UIL Holding, TECO, DQE, IDACORP, DPL and OGE Energy. Please give me your opinions on these issues. I would consider putting $10,000 in each utility.

If I bought all six, the combined yield would be about 6.8 percent, which by my computation would give me a dividend income of almost $4,120. With the new tax law, in which dividends are taxed at only 15 percent, I should pay only $618 in taxes. That means I would have net income of $3,502, giving me a 5.8 percent after tax return.

Please give me your thoughts on these utilities and let me know if my thinking is right.

E.W., Mount Dora, Fla.

Dear E.W.:

Yes, a 6.8 percent taxable return computes to a 5.8 percent after-tax return, which is certainly more than you get from your CDs. That’s attractive. Your thinking is right, but some of the choices you made to earn 6.8 percent may be too risky for you at your age and stage.

UIL Holding Corp. (UIL-$35.90), a small southern Connecticut utility, has been paying a $2.88 dividend for the past eight years. Its current yield of 8.0 percent is attractive, but speculative. UIL is not expected to earn its dividend this year and probably won’t earn it in 2004 or 2005. The dividend is not on solid ground, but cash flow can cover the payout. This may be too risky for you.

TECO Energy Inc. (TE-$11.77) pays 76 cents and yields 6.5 percent. Formerly Tampa Electric, TE serves about 600,000 customers in Central Florida. The dividend was slashed this year from $1.42 to raise funds for its unregulated power service subsidiaries. Its bonds were lowered to junk status. Meanwhile, TE is having trouble selling excess capacity, which could affect earnings in the coming few years. I think the dividend is safe. TE probably needs another 12 months to get its house in order.

DQE, the parent company of Duquesne Light Co. (DQE-$14.49), serves 600,000 customers in southwestern Pennsylvania, including Pittsburgh. DQE suffered sharp earnings declines in 2000 and 2001 and has been divesting itself of its non-core assets, the revenues of which will reduce its huge debt. Its $1 dividend (reduced from $1.68) yields 7.1 percent and appears safe.

Earnings look as if they are in a recovery mode. DQE may be a prudent risk.

OGE Energy Corp. (OGE-$21.53), whose subsidiaries include Oklahoma Gas & Electric Co., pays a $1.33 dividend that yields 6.2 percent and hasn’t changed since 1992. OGE has a difficult regulatory environment and its earnings, which have been flat as a mirror for a dozen years, are expected to remain flat for the foreseeable future. Value Line’s Paul Debbas says that OGE’s future earnings power may not allow the company to maintain its dividend. Sadly, poor management is to blame for OGE’s sorry earnings. Its dividend may be cut.

DPL Inc., or Dayton Power & Light (DPL-$15.39), pays a 94-cent dividend, yielding 6.1 percent. DPL’s bottom line should benefit from refinancing and a $325 million reduction of long-term debt. The company’s investment portfolio is in sick shape, and 80 percent of the assets are in private securities that are not readily sellable. There have been some recent board resignations and six chief financial officers in the past five years. The dividend appears safe, but the stock will probably remain dead in the water.

IDACORP Inc. (IDA-$24.07), which operates as Idaho Power Co., pays a $1.86 dividend yielding 7.1 percent. IDA recently canceled a 275-megawatt power plant because it couldn’t finance the project on acceptable terms. IDA is also exiting its power and natural gas trading businesses and may sell interests in some non-core assets. The dividend, which has been $1.86 since 1991, was not earned last year, will not be earned this year and may not be earned in 2004 or 2005. So some suits on Wall Street expect IDA to drop its dividend to a level somewhere between $1.50 and $1.20.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.