Wednesday, November 28, 2012
Eight Huge Special Dividends to Watch Out for in Tech Before Year-End
These are eight technology players which could substantially reward their common shareholders with large one-time payments before 2012 comes to an end:
Apple Inc. (NASDAQ: AAPL) is the monster when it comes to which company sits on the world’s largest cash pile. It is also the monster when it comes to its market cap of $551 billion even after shares are down so much from the highs of over $700 recently. Most of its “cash” is in long-term securities but if you tally up Apple’s liquidity it has about $120 billion in its arsenal. Apple could easily pay out 8% to 10% of its market cap in a special dividend and it would not be noticed in the grand scheme of things. If the company wanted to get very aggressive, it could even borrow $25 billion to turn around and distribute it to shareholders. Apple generates so much cash that it could pay that back in a year and still show positive cash growth.
Corning Inc. (NYSE: GLW) may have gotten some good news on glass demand this week, but it is still suffering relentlessly from competitive markets in glass screens. With a market cap of about $18 billion, this leader trades at a discount to its book value. Corning also has close to $11.4 billion in cash, short-term assets and long-term assets. Corning already raised its dividend in November and offers close to a 3% yield but it could easily pay out 10% to its holders without increasing leverage too much.
Dell Inc. (NASDAQ: DELL) may need to hoard its cash to remain defensive and it may need to look for more acquisitions in the IT-services sector. With its shares down and out, you have to wonder about its cash balance and long-term investments coming to roughly $15 billion today. We would never expect this to occur, but this PC player could literally scrape up enough cash to pay out a special dividend that comes to 25% to 50% of its $17 billion market cap. With the tax deadline looming, envisioning a 10% or 15% special dividend would be no sacrifice to the company. It already pays a 3.4% yield as is.
eBay Inc. (NASDAQ: EBAY) has lost its growth and since it trades close to a 52-week high it is even hard to call a value stock any longer. The company has made many deals in the past but has yet to pay a dividend. With a $66 billion market value, eBay has close to $12 billion on its books in cash and short-term and long-term securities. As it already has close to a monopoly in online consumer auctions in America, does it really need to hold all of this cash? Paying a 5% special cash dividend and finally instituting a dividend with a 2% yield would not hurt the company at all.
Juniper Networks, Inc. (NYSE: JNPR) has been overlooked in the technology value plays. It currently does not pay a regular dividend. Some have considered it a takeover candidate as well. If you tally up the networking equipment maker’s cash and short-term and long-term investments it comes to over $4 billion against a market cap of $8.7 billion. Even if Juniper has significant assets locked up it could easily scrape up almost $1 billion to come up with a 10% special cash dividend for its shareholders. With shares at $16.80, its 52-week range is $14.01 to $25.04.
Microsoft Corporation (NASDAQ: MSFT) has such a large cash balance that you wonder just what it will or can do with all of that cash. Unfortunately a large portion of its capital is overseas due to its sales being global. If you tally up the long-term investments and its cash and short-term assets, Microsoft is sitting on somewhere around $75 billion. With a market cap of $230 billion, Microsoft could pay a 10% special dividend and it would not even have to blink its eyes.
Oracle Corporation (NASDAQ: ORCL) is a great laggard when it comes to dividends. Its yield is less than 1% and its market cap is over $150 billion. Larry Ellison and friends have a cash arsenal of more than $31 billion. Ellison recently said that he would rather return cash gradually with hikes, but even if it wants to save its cash for another large deal out in a year or two as it telegraphed before it does not need $31 billion. By sending back half of that cash, Oracle could have a 10% special cash dividend and still have more than $15 billion on its books.
Yahoo! Inc. (NASDAQ: YHOO) just became a cash monster now that it monetized part of its Alibaba stake and repatriated that cash. If you tally up its cash and short-term and long-term investments it now sits on close to $13 billion in liquidity with close to no long-term debt. With a market cap of $22 billion this perpetual turnaround trades at about 2-times its tangible book value. The company previously pledged to return 85% of that $4+ billion in net after-tax proceeds to holders but it did not specify how. Marissa Mayer hs the stock at $19 and at a 52-week high so she can do whatever she wants and likely be able to sell it. Our take is that a large one-time dividend would be best, but the company can likely do what it wants without being punished right now.
With this being the last week of November, if a company is going to conduct a special dividend its time is running out. Taxes are likely headed higher for dividends so these companies need to decide how to best maximize the after-tax returns for shareholders.
http://247wallst.com/2012/11/27/8-huge-special-dividends-to-watch-out-for-in-tech-before-year-end/
Thursday, January 05, 2012
The Most Promising Dividends in Coal
Dividend payers deserve a berth in any long-term stock portfolio. But seemingly attractive dividend yields are not always as fetching as they may appear. Let's see which companies in the coal industry offer the most promising dividends.
Yields and growth rates and payout ratios, oh my!
Before we get to those companies, though, you should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns.
As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."
When hunting for promising dividend payers, unsophisticated investors will often just look for the highest yields they can find. While these stocks will indeed pay out the most, the yield figures apply only for the current year. Extremely steep dividend yields can be precarious, and even solid ones are vulnerable to dividend cuts.
When evaluating a company's attractiveness in terms of its dividend, it's important to examine at least three factors:
•The current yield
•The dividend growth
•The payout ratio
If a company has a middling dividend yield but a history of increasing its payment substantially from year to year, it deserves extra consideration. A $3 dividend can become $7.80 in 10 years, if it grows at 10% annually. (It will top $20 after 20 years.) Thus, a 3% yield today may be more attractive than a 4% one, if the 3% company is rapidly increasing that dividend.
Next, consider the company's payout ratio, which reflects what percentage of income the company is spending on its dividend. In general, the lower the number, the better. A low payout ratio means there's plenty of room for generous dividend increases. It also means that much of the company's income remains in its hands, giving it a lot of flexibility. That money can fund the business's expansion, pay off debt, buy back shares, or even buy other companies. A steep payout ratio reflects little flexibility for the company, less room for dividend growth, and a stronger chance that if the company falls on hard times, it will have to reduce its dividend.
Peering into coal
Among coal stocks, Oxford Resource Partners and Natural Resource Partners are among the highest-yielding stocks, offering 11.6% and 7.9%, respectively. But they're not necessarily your best bets. Oxford just debuted on the market via IPO in 2010, and it's not profitable at the moment. Natural Resource, meanwhile, sports a scary payout ratio, although the fact that it's a master limited partnership that's required to distribute income explains the payout ratio in part. Penn Virginia Resource Partners (NYSE: PVR ) , with a 7.7% yield, also sports a steep payout ratio, along with slowing earnings growth. Its top line has been growing, though, offering some hope that it can turn things around.
Let's next turn to the dividend growth rate, where Walter Energy (NYSE: WLT ) leads the way, with a five-year average annual dividend growth rate of 27.4%. That growth rate is so steep in part because its yield is very low, at less than 1%. Even at a fast growth rate, it'll take a while to reach an attractive level. In the meantime, it's appealing to some investors for its positive cash flow generation and because some think it might get bought out.
Some coal companies, such as Patriot Coal (NYSE: PCX ) and James River Coal (Nasdaq: JRCC ) , don't pay dividends at all. That's because smaller or fast-growing companies often prefer to plow any excess cash into further growth rather than pay it out to shareholders. Patriot Coal is conserving cash after having been plagued with production problems lately, while James River spent cash to acquire greater metallurgical coal production capability. Both companies can benefit from strong global demand for coal and for met coal, used in steel production.
Just right
As I see it, Alliance Resource Partners and Yanzhou Coal Mining (NYSE: YZC ) offer the best combination of dividend traits, sporting some solid income now and a good chance of strong dividend growth in the future. Yanzhou, with a recent yield of 3.8% and a five-year dividend growth rate of 12%, has benefited from rising coal prices in China and has boosted its production capacity. Alliance Resource, yielding 5.1% and growing its dividend at 13% annually, boasts some long-term contracts that can protect it from market volatility.
Of course, as with all stocks, you'll want to look into more than just a company's dividend situation before making a purchase decision. Still, these stocks' compelling dividends make them great places to start your search, particularly if you're excited by the prospects for this industry.
Do your portfolio a favor. Don't ignore the growth you can gain from powerful dividend payers.
http://www.fool.com/investing/dividends-income/2012/01/05/the-most-promising-dividends-in-coal.aspx
Looking for some All-Star dividend-paying stocks? Look no further
Yields and growth rates and payout ratios, oh my!
Before we get to those companies, though, you should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns.
As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."
When hunting for promising dividend payers, unsophisticated investors will often just look for the highest yields they can find. While these stocks will indeed pay out the most, the yield figures apply only for the current year. Extremely steep dividend yields can be precarious, and even solid ones are vulnerable to dividend cuts.
When evaluating a company's attractiveness in terms of its dividend, it's important to examine at least three factors:
•The current yield
•The dividend growth
•The payout ratio
If a company has a middling dividend yield but a history of increasing its payment substantially from year to year, it deserves extra consideration. A $3 dividend can become $7.80 in 10 years, if it grows at 10% annually. (It will top $20 after 20 years.) Thus, a 3% yield today may be more attractive than a 4% one, if the 3% company is rapidly increasing that dividend.
Next, consider the company's payout ratio, which reflects what percentage of income the company is spending on its dividend. In general, the lower the number, the better. A low payout ratio means there's plenty of room for generous dividend increases. It also means that much of the company's income remains in its hands, giving it a lot of flexibility. That money can fund the business's expansion, pay off debt, buy back shares, or even buy other companies. A steep payout ratio reflects little flexibility for the company, less room for dividend growth, and a stronger chance that if the company falls on hard times, it will have to reduce its dividend.
Peering into coal
Among coal stocks, Oxford Resource Partners and Natural Resource Partners are among the highest-yielding stocks, offering 11.6% and 7.9%, respectively. But they're not necessarily your best bets. Oxford just debuted on the market via IPO in 2010, and it's not profitable at the moment. Natural Resource, meanwhile, sports a scary payout ratio, although the fact that it's a master limited partnership that's required to distribute income explains the payout ratio in part. Penn Virginia Resource Partners (NYSE: PVR ) , with a 7.7% yield, also sports a steep payout ratio, along with slowing earnings growth. Its top line has been growing, though, offering some hope that it can turn things around.
Let's next turn to the dividend growth rate, where Walter Energy (NYSE: WLT ) leads the way, with a five-year average annual dividend growth rate of 27.4%. That growth rate is so steep in part because its yield is very low, at less than 1%. Even at a fast growth rate, it'll take a while to reach an attractive level. In the meantime, it's appealing to some investors for its positive cash flow generation and because some think it might get bought out.
Some coal companies, such as Patriot Coal (NYSE: PCX ) and James River Coal (Nasdaq: JRCC ) , don't pay dividends at all. That's because smaller or fast-growing companies often prefer to plow any excess cash into further growth rather than pay it out to shareholders. Patriot Coal is conserving cash after having been plagued with production problems lately, while James River spent cash to acquire greater metallurgical coal production capability. Both companies can benefit from strong global demand for coal and for met coal, used in steel production.
Just right
As I see it, Alliance Resource Partners and Yanzhou Coal Mining (NYSE: YZC ) offer the best combination of dividend traits, sporting some solid income now and a good chance of strong dividend growth in the future. Yanzhou, with a recent yield of 3.8% and a five-year dividend growth rate of 12%, has benefited from rising coal prices in China and has boosted its production capacity. Alliance Resource, yielding 5.1% and growing its dividend at 13% annually, boasts some long-term contracts that can protect it from market volatility.
Of course, as with all stocks, you'll want to look into more than just a company's dividend situation before making a purchase decision. Still, these stocks' compelling dividends make them great places to start your search, particularly if you're excited by the prospects for this industry.
Do your portfolio a favor. Don't ignore the growth you can gain from powerful dividend payers.
http://www.fool.com/investing/dividends-income/2012/01/05/the-most-promising-dividends-in-coal.aspx
Looking for some All-Star dividend-paying stocks? Look no further
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