Diana Shipping (NYSE: DSX) shares have been sinking today after the company announced it will suspend dividend payments after December. DSX had been paying a 25.30% annual dividend rate. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on DSX.

This morning, DSX opened at $12.50. So far today the stock has hit a low of $10.28 and a high of $11.01. As of 2:35, DSX is trading at $10.96, down $2.97 (21.3%). The chart for DSX looks bearish.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $12.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in ten days as long as DSX is below $12.50 at November expiration. DSX would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in DSX.

Analyst upgrades:

• Deutsche Bank upgraded shares of UBS (NYSE: UBS) to Buy from Hold following the company's Q3 update as they believe the quarter marks a turning point.
• Merill raised BP Plc (NYSE: BP) and Total SA (NYSE: TOT) to Neutral from Underperform.
• DISH Network (NASDAQ: DISH) was lifted to Hold from Sell at Soleil.
  
• Friedman Billings upgraded Sovereign Bancorp (NYSE: SOV) to Market Perform from Underperform as they believe the company's deposits are showing stability despite the massive sell-off.
  
• Kaufman Bros. raised Longtop Financial (NYSE: LFT) to Buy from Hold on valuation as they believe Chinese software service stocks now reflect the investment risks.
• Lear (NYSE: LEA) was upgraded to Hold from Sell at Citigroup.

Analyst downgrades:

• Morgan Stanley downgraded eBay (NASDAQ: EBAY) to Equal Weight from Overweight citing checks that indicate deteriorating trends are worst than expected.
  
• Juniper (NASDAQ: JNPR) and Pediatrix Medical (NYSE: PDX) were downgraded to Market Perform from Outperform at Morgan Keegan.
  
• Merrill cut StatoilHydro (NYSE: STO) to Underperform from Neutral.
  
• HSBC (NYSE: HBC) was lowered to Market Perform from Outperform at Keefe Bruyette.

MOST NOTEWORTHY: Diana Shipping, Avanex and Fushi International were today's noteworthy initiations:

• Stephens believes Diana Shipping's (NYSE: DSX) current share price represents an attractive entry point for investors. Shares were started with an Overweight rating and $40 target.
  
• Avanex (NASDAQ: AVNX) was initiated with a Buy rating at Merriman. The firm believes the recovery in optical that began in late 2005 is in a relatively early stage and that new product introductions and strong optical trends will drive growth and leverage.
  
• Jefferies assumed coverage of Fushi International (NASDAQ: FSIN) with a Buy rating and $20 target and believes the telecom infrastructure build-out in emerging markets, particularly China, and high copper prices continue to create opportunities for the company.

OTHER INITIATIONS:

• Mattel (NYSE: MAT) was assumed at Caris with an Above Average rating and $25 target.
  
• Lehman initiated Garmin (NASDAQ: GRMN) with an Equal Weight rating.
  
• Keefe Bruyette initiated Invesco (NYSE: IVZ) with an Outperform ratin gand $28 target.

TheStreet.com's Jim Cramer says investors need to look at the longer time frame and see what drove rates higher to begin with -- world trade and a ship shortage.

Freakout on dry bulk ships! That's what happened yesterday. The hot money saw the break in the rates and skedaddled.

Should you?

Do you believe that rates are done going up? Do you know about secret ships that are being built or contracts being broken? Or revised down? Do you know what's falling apart?

Nothing.

Nothing at all.

Maybe that shouldn't matter. Maybe all that mattered were the stocks, and they are now "bad."

MOST NOTEWORTHY: Mattel, Volvo, PMI Group, Mosaic and Diamond Foods were today's noteworthy upgrades:

• Oppenheimer upgraded shares of Mattel Inc (NYSE: MAT) to Buy from Neutral citing valuation, strong 2008 product line-up, and expected organic sales growth.
  
• Goldman upgraded shares of Volvo (NASDAQ: VOLV) to Buy from Neutral on valuation as they believe the company's prospects for earnings are not priced into shares. Volvo was added to the firm's Conviction Buy List.
  
• PMI Group's (NYSE: PMI) rating was raised to Outperform from Market Perform at Piper Jaffray on valuation.
  
• Citigroup upgraded shares of Mosaic Company (NYSE: MOS) to Hold from Sell to reflect their increased commodity price forecasts.
  
• Diamond Foods Inc (NASDAQ: DMND) was upgraded to Buy from hold at BB&T Capital on valuation.

OTHER UPGRADES:

• Bear Stearns upgraded Diana Shipping Inc (NYSE: DSX) to Outperform from Peer Perform.
  
• Morgan Stanley upgraded Telephone and Data Systems Inc (NYSE: TDS) to Equal Weight from Underweight.
  
• Targa Resources Partners (NASDAQ: NGLS) was upgraded to Outperform from Market Perform at Wachovia.
  
• Steelcase Inc (NYSE: SCS) was upgraded to Neutral from Sell at Goldman.

MOST NOTEWORTHY: Delta Air Lines (DAL), Diana Shipping Inc (DSX), Adobe Systems Inc (ADBE), Eagle Materials, Inc (EXP), ACR Group (BRR) and Autodesk, Inc (ADSK) were today's noteworthy initiations:

• Goldman is positive on Delta Air Lines (NYSE: DAL), starting shares with a Buy rating and $25 target based on above average growth, best-in-class unit costs, free cash flow and less labor cost risk.

• Diana Shipping (NYSE: DSX) was started at JP Morgan with an Overweight rating based on valuation and positioning. Lazard started Diana with a Buy rating, expecting demand for dry bulk shipping will outperform supply through 2010.

• Soleil expects Adobe Systems (NASDAQ: ADBE) recently released Creative Suite 3 to be the near-and-medium term growth driver and started shares with a Buy rating.

• JP Morgan started Eagle Materials Inc (NYSE: EXP) with an Underweight rating, expecting a decline in wallboard industry profitability due to increased capacity and lower demand.

• B. Riley started ACR Group (AMEX: BRR) with a Buy rating calling the stock "cheap."

• Soleil believes a catch up on the Autodesk's (NASDAQ: ADSK) SEC filings and a strong Q1 will prove near-term catalysts and started shares off with a Buy rating and $56 target.

OTHER INITIATIONS:

• Merrill Lynch started Super Micro Computer, Inc (NASDAQ: SMCI) and Capital Product Partners LP (NASDAQ: CPLP) with Buy ratings.

• Banc of American started Verigy Ltd (NASDAQ: VRGY) with a Buy rating and $32 target.

• Stephens initiated Kaman Corp (NASDAQ: KAMN) with an Overweight rating and $34 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Several weeks ago, I wrote a piece about how I feel about dividends as a matter of principle: I strongly believe that share buybacks and paying down debt are much better ways for companies to increase shareholder value. However, some investors cling to the (illusion of) safety created by dividends, and so I'm going to provide a few pointers on how to evaluate dividend-paying stocks. When evaluating stocks for income, we want to examine the size of the yield, the sustainability of the yield, and potential for capital appreciation. Generally, it's very hard to find stocks with large sustainable yields and the potential for capital appreciation, so you will probably have to settle for two of the three.

For the purpose of this tutorial, we will be evaluating three stocks: The Altria Group (NYSE: MO), The Boulder Growth and Income Fund (NYSE: BIF), and Diana Shipping (NYSE: DSX).

Evaluating the Size of the Dividend: This is the easiest part. This consists of dividing the total value of the dividends each year by the current share price. This gives you a percentage. MO has a yield of 3.91%. DSX has a yield of 10.03%, and BIF has a yield of 11.85%. So the Boulder Growth and Income Fund is offering the largest dividend, but all three are solidly above the 1.52% yield of the average S&P 500 stock. (Source: indexarb.com.)