"Founded in 1994, Cellcom (NYSE: CEL) holds the dominant position in Israel's wireless market; it serves about 3.2 million customers, it enjoys around a 34% market share," says Carla Pasternak.

In her specialty service, High Yield International, she adds, "Overall, the shares are attractively value, and should continue to delight investors with stable growth and a high yield." Here's her review.

"Cellcom's policy is to distribute at least 75% of net income in quarterly dividends. As such, dividends vary with earnings.

"Gross (before withholding tax) distributions of $0.62 in December 2008, $0.53 in March 2009, $0.68 in June, and $0.64 in August total 

"The last four payments have totaled $2.47, for a trailing yield of 8% ($2.47/$30.47). Bloomberg estimates call for a final distribution of $0.84 in late November, which would spike the trailing yield to nearly 9% of today's purchase price ($2.69/$30.47).

"Dividends are paid in U.S. dollars after being converted from the Israeli shekel, so they are subject to currency fluctuations.

"According to Israeli tax law, the company must deduct 20% of the dividend amount payable to U.S. shareholders. Investors can claim a foreign tax credit for this amount against their federal income tax.

"The dividends should qualify for the reduced dividend tax rate of up to 15%, making the shares suitable for a taxable brokerage account. 

"Earnings have grown an average 33% annually over the past five years as the company aggressively grew its share of the Israeli market with enhanced services and technological upgrades.

"Data services now account for about 15% of revenues. To capture more of this lucrative market, Cellcom launched the 'Android' smartphone by Samsung and plans to market the popular iPhone from Apple.

"Even with only slightly higher revenues, net income was up solid 15% over last year to $70.7 million ($0.72 per share). The rise was aided by stronger profit margins as operating expenses fell from 21.9% of revenue in last year's second quarter to 21.3% this year.

"Cellcom does have about $1.2 billion in debt versus $1.6 billion in equity, but the debt burden seems quite manageable. Operating income of $113 million easily covered debt expenses of $30 million.

"Growth in the Israeli market is limited given the country already has around a 125% cellular penetration rate (some people have more than one cell phone). Moreover, Cellcom does face significant competitio.

"But Israel's relatively young population is a demographic more open to subscribing to new technologies and data services. And at this point, there seems to be enough business to go around.

"While Cellcom's dominant position and competitive technology should allow the company to continue churning out increasing cash flow, growth is expected to slow going forward compared to the rapid pace of the past five years.

"Per share earnings are expected to grow around 12% this year and another 5% next year, for a still robust average of about 10% annually over the next five years.

"I first flagged CEL at $26.20 as one of my 'star' performers in July and since then, the shares have provided a total return of nearly 20%.

"However, the stock is still off their 2008 peak levels of around $37, offers a rich yield, and carries an extremely low forward PE of less 3 times 2010 projected earnings of $11.66 per share. I believe they are appropriate for all but the most conservative income investors."