Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

There are 9 full time employees at PDLI. Revenues in 2007 hit $463 million, then went to $294.3 million, followed by $318 million last year. This year, 6 analysts see $353.27 million, then $400.85 million in 2011.

Earnings, on the other hand, have been consistently better, starting with a negative 14 cents a share in 2007, then going positive to 90 cents a share. Last year, they were $1.07. Six analysts have a consensus estimate of $1.16 this year, then $1.35 next year. Earnings for the first quarter will be out on April 29. Look for 23 cents a share, the same as last year's first quarter. For the second quarter, expect 45 cents a share, down slightly from the 47 cents of last year's second period.

Here's one red flag: PDL's patents expire in 2013 and 2014. That means sales and profits may change dramatically by 2016. (The company will have about 2 years of continuing sales since most drug manufacturers produce up to 2 years worth of product.) That gives the company 3 to 4 years to come up with new drugs or buy other companies or other royalty streams.

Here's another flag: while PDLI paid a large dividend ($1.00 in 2009 and expected to pay $1.00 in 2010, 50 cents of which was paid in early April as a special dividend), the company has no dividend policy. The $1 sent to shareholders in 2009 was in 2 installments, one in June and one in December, of 50 cents each. This year it looks like another payment in September is scheduled. But since the company has no stated policy to pay the dividend, management may use the money to buy royalty rights to other drugs.

The company is determined to return cash to shareholders, either in dividends or an outright sale of the company. That gives them a lot of leeway as to what they will actually do with their cash flow. If they decide to buy more royalties, that will take cash. And then management can claim it is positioning the company for sale as a way to appease shareholders.

More numbers: Market Cap is $756.54 million. Trailing P/E is 5.93. Forward P/E is 4.7. Price to sales ratio is 2.40. Operating margin for the last 12 months was 93.38% while Profit margin was 59.61%. Return on assets was 70.14%. Total cash is $303.23 million or $2.53 a share. Total debt is $728 million , over 1200% of capital. Book value per share is negative $3.48. There are 119.67 million shares outstanding and a Float of 119.37 million. Insiders own .7% of the stock. Institutions own 97.40%. The stated dividend for 2010 is $1.00 for a yield of 15.60%. Value Line gives the stock a B+ for Financial Strength.

A very high yield, such as the one PDLI shows, is like a flame for a moth. Investors are drawn to it, hypnotically. But caution is warranted here. The company's dividend was only paid one year, in 2009. And there is no stated dividend policy by the company, only a commitment to return cash to shareholders which could include selling the company. Income investors will want to consider this stock if they have a tendency to aggressive investing behavior. There's a lot to like at PDLI, but caution is also warranted about the high dividend yield. More research is definitely required before considering this stock.

One other note: the stock traded at $84.50 in 2000, crashed to $6.90 in 2003, then rebounded to $33.30 in 2006, only to hit $5.20 in 2009. Proceed with caution.

- Company Web site: www.pdl.com