The Times 100 : The Best Performing Companies in California : VIEW FROM THE STREET : Stocks With Fat Yields Often Have Thin Prices

As ever, the easiest way to the top of the list, as far as high-yield stocks are concerned, is a precipitous drop in share price.

It’s a matter of simple arithmetic.

“Yield” is the ratio of a stock’s dividend to its purchase price.

Thus, the 10% yield on shares of Hypothetical Industries Inc., trading at $10 and with a $1 dividend, will double to 20% if the dividend doubles--or if the stock price plunges to $5.

Not surprising, two-thirds of the companies on the “Divvying It Up” list of the 15 highest-yield stocks are trading at or near their 52-week low. The yield is up because the shares are down.

Adac Laboratories, for example, rose to the top of this year’s dividend list with a 10.67% annual yield because its shares dropped 76% to $1.50. That happened as lower customer spending and increased competition knocked the wind out of the Milpitas medical image-processing company’s sales.

Northrop Transtechnology Corp., hit by the defense downturn, and General Parametrics Corp., hurt by the collapse of earnings in its computer-graphics equipment business, also joined the list as their shares weakened. Similarly, CalFed, Glenfed and First Interstate--all high-yield stocks last year--climbed a few notches as their share prices fell amid turmoil related to real estate lending and other problems.

Some perennially sound stocks, of course, pay a high dividend to attract investors who might be put off by their relatively dull growth prospects. Pacific Gas & Electric, for instance, makes the list with a 6.99% yield, even though it is trading near its 52-week high, thanks to rising earnings.

But the perils of shooting for yield alone should be readily apparent: Troubled companies often eliminate dividends, and a weak stock might keep falling, wiping out your investment altogether.

Just such problems occurred as two of last year’s yield leaders, Mercury Savings & Loan and Homestead Financial, fell victim to the thrift crisis. Homestead scratched its dividend in a crash program to improve its capital position, and Mercury was seized by federal regulators.

DIVVYING IT UP

Companies ranked by dividend as a percentage of stock price.

Dividend as a % of 4/10/90 Rank Company stock price stock price 1 Adac Laboratories 10.67 1.50 2 Glenfed 9.80 12.25 3 PLM International 9.65 7.88 4 Transtechnology 9.60 10.00 5 Occidental Petroleum 9.22 27.13 6 First Interstate Bancorp 8.96 33.50 7 Calfed 8.30 16.88 8 Pacific Enterprises 7.71 45.13 9 Southern California Water 7.50 28.25 10 SJW 7.50 24.81 11 General Parametrics 7.38 3.25 12 Northrop 7.06 17.00 13 Pacific Gas & Electric 6.99 21.75 14 SCEcorp 6.85 37.38 15 California Water Service 6.63 26.25