Many investors need income, especially as they reach retirement. They look for ancillary cash flow to supplement their Social Security payments and any retirement benefits from a company for which they've worked. But those aren't the only investors who should be interested in income.

That's because studies show that dividends are a significant contributor to overall performance of a stock. When held for years, a stock's dividend can help diminish the volatility of a stock's price and keep returns reasonable, especially in down markets. Here are five stocks that have decent income as well as potential capital gains. All are exceptionally financially strong.

Analyst upgrades:

• Royal Bank of Scotland upgraded shares of Vodafone (NYSE: VOD) to Buy from Hold to reflect the company's dividend yield.
  
• JMP Securities expects HFF Inc. (NYSE: HF) to benefit from increased U.S. commercial real estate sales and mortgage volumes. Shares were upgraded to Outperform from Market Perform. The firm has a $5 target on shares.
  
• Oppenheimer upgraded Church & Dwight (NYSE: CHD) to Outperform from Perform as it believes Church & Dwight's value-oriented portfolio should continue to benefit from the consumer trade-down and that concerns over distribution are overblown. The firm set a $62 price on shares.
• Regeneron (NASDAQ: REGN) was upgraded to Buy from Neutral at Piper Jaffray.
  
• Burlington Northern (NYSE: BNI) was raised to Buy from Neutral at Goldman.
• AMB Property (NYSE: AMB) was lifted to Neutral from Underperform at Banc of America/Merrill.

MOST NOTEWORTHY: Allegheny Tech, Carpenter Tech, Haynes, Motorola and Machinery stocks were today's noteworthy downgrades:

• JP Morgan downgraded Allegheny Tech (NYSE:ATI), Carpenter Tech (NYSE:CRS) and Haynes (NASDAQ:HAYN) to Neutral from Overweight based on the decline in nickel prices and its impact on nickel-based metals demand on valuation, as they find the risk/reward less attractive following the recent rally and increased raw material costs.
  
• Oppenheimer downgraded shares of Motorola (NYSE:MOT) to Underperform from Perform after channel checks indicated the company could miss Q2 handset guidance and continued market share losses.
• UBS said the risk/reward profile for owning Machinery stocks given macro challenges and valuations. The firm downgraded Caterpillar (NYSE:CAT) and Kennametal (NYSE:KMT) to Sell from Neutral and United Rentals (NYSE:URI) and RSC Holdings (NYSE:RRR) to Neutral from Buy. Additionally, shares of Paccar (NASDAQ:PCAR) were cut to Sell from Neutral and Navistar (OTC:NAVZ) was downgraded to Neutral from Buy due to weak U.S. truck demand.
  

OTHER DOWNGRADES:

• Jefferies cut Hercules Inc (NYSE:HPC) to Hold from Buy.
  
• Goldman downgraded Pfizer (NYSE:PFE) and DirecTV (NASDAQ:DTV) to Neutral from Buy.
  
• Regeneron (NASDAQ:REGN) was downgraded to Neutral from Outperform at Credit Suisse.

The notes out of the Fed gave no indication of rate cuts. Too much worry about inflation.

After a report showing that supplies have dropped, oil traded north of $132.00 per barrel today. Maybe T. Boone Pickens' call for $150 oil was intended to be by the end of the month rather than the end of the year. The minutes from the last FOMC meeting may say it all: increased inflation expectations, increased unemployment expectations, lowered GDP expectations. But no recession, at least not officially while the Fed describes the environment of stagflation. Below are the unofficial closing US index levels:

DJIA: 12,602.66 down 1.76%
S&P500: 1,390.86 down 1.59%
NASDAQ: 2,448.27 down 1.77%
52-WEEK LOWS
TOP 10 ANALYST CALLS

AMR Corp. (NYSE: AMR) saw shares fall a sharp 25% after the company announced at its annual shareholder meeting that it was going to slash 11% or 12% from its flight capacity. To make bad matters worse, Soleil issued an untimely downgrade of the sector today.

Baidu (NASDAQ: BIDU), a Chinese-language internet search provider, is recently down $33.10 to $310.09. BIDU call option volume of 95,184 contracts compares to put volume of 67,862 contracts. BIDU October 330 straddle is priced at $35.50. BIDU November option implied volatility of 90 is above its 26-week average of 55, according to Track Data, suggesting larger price fluctuations.

Regeneron (NASDAQ: REGN), is primarily focused on the development of drugs for oncology. REGN is recently up $0.59 to $19.09. REGN October 20 calls have traded 42 times on transaction volume of 881 contracts, above its open interest of 710 contracts. REGN November call option implied volatility is at 85, puts are at 73 above its 26-week average of 56, according to Track Data, suggesting larger risk.

Volatility Index S&P 500 Options: VIX.X up 2.54 to 19.21.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

On tonight's MAD MONEY on CNBC, Jim Cramer said that Caterpillar Inc. (NYSE:CAT) is being kept too low. He thinks the Chinese are back into buying commodities and the company is leveraged to commodities more than to housing. The subprime meltdown is not a worry for it. Cramer thinks the commodities going back up is much more important to it. The Yen strengthening is also actually good for the company in that the Japanese can buy our products for cheaper. He thinks CAT has the best dealer network out there, but the stock is still sleeping. If it doesn't run, you have a $7.5 billion buyback plan and a director just bought some.

Cramer also discussed Regeneron Pharmaceuticals (NASDAQ:REGN) as one where he had interviewed the CEO of the company back when he started doing MAD MONEY. This went fom $5 to $24 even though it still doesn't have a product on the market. He wanted to review it now that it has gone back down close to $18.00. One that he likes in the sector just as much as REGN back-when is Nastech Pharmaceutical (NASDAQ:NSTK). NSTK loses money and it lost Merck on the obesity study, and for a while it only issued press releases. The stock is thought of as a joke, but now you must own it if you are a biotech speculator. He reviewed the company for five days before reviewing it. It has $90 million cash and has compounds for RNA Interference tests, obesity, osteoporosis and others. None of the products are commercial, yet, but it has plenty of cash. When it got crushed they left the Street with no reason to own the stock. At the end of the year they stopped issuing press releases and now the main seller has finally cleaned out of the stock. Cramer thinks the compounds may actually work and Wall Street doesn't know it. They have also hired a great industry person to help it work on compounds. He thinks NSTK can be the next REGN type of move.

Jon C. Ogg
March 16, 2007