The list below highlights high yield dividend stocks with a very bullish equity summary score between 9.1 to 10. These stocks are also rated a buy or hold by S&P stock ratings. The following is a summary of most recent research notes for the top stocks from this list.
Telecom Italia SpA (TI) – Q3 revenues were up 3.7% and EBITDA was up 0.8%, stronger than we expected. Results improved at the Italian domestic operations where the pace of decline eased, with revenues down 2.8% and EBITDA down 2.5%, vs. respective Q2 declines of 5.1% and 4.8%. While we expect revenues in Italy to fall about 2.5% in ’12, we expect operations in Brazil and Argentina to continue to perform well. To reflect the weakening of the Euro vs. the U.S. dollar, we lower our operating earnings per ADS estimates $0.16 to $1.40 for ’11 and by $0.30 to $1.40 for ’12. Our target price remains $13.
AstraZeneca PLC (AZN) – Q3 earnings per ADS of $1.70, vs. $1.50, surpassed our $1.46 estimate. We attribute the beat to higher than expected sales, and reductions in interest expense and taxes. A $5B share buyback also lowered the share count. In view of the strong Q3, we raise our ’11 ADS profit forecast to $7.30 from $7.12. While Q4 Crestor sales are likely to be hurt by generic Lipitor and slowing trends in Brazil, we think long-term prospects remain favorable, aided by an expanding new drug portfolio. We raise our target price by $2 to $52, based on revised DCF and forward P/E assumptions.
Total SA (TOT) – We think TOT has performed well, despite flat Q3 production on a slow ramp of new projects. TOT merged Refining/Chemicals and plans to trim European refining. It is negotiating with labor unions to restructure downstream in ’12. Production growth target is 2.5% in ’11, on its 12% acquisition of Novatek. We see new volumes from Nigeria and Angola and more aggressive exploration. We believe pending Shtokman deal will pass when Russia implements a more competitive fiscal regime. We lift our ’11 GAAP EPS estimate $0.40 to $8.25 and ’12’s by $0.80 to $8.70. Dividend yields 5.65%.
Plains All American Pipeline LP (PAA) – The proposed acquisition of Canadian NGL and LPG assets from BP plc (BP 43, Hold) for $1.67B is expected to boost PAA’s ’12 distribution payout 8%-9% ($3.98 currently). Also, PAA has entered or completed 4 other deals for a total of $620M, focused on South Texas oil. Separately, and before acquisitions, PAA sees Q4 EBITDA exceeding guidance of $410M by 10%-15%, and we lift our ’11 earnings per unit forecast $0.22 to $4.90. Based on a target yield of 5.4%, in line with peers, and a ’12 distribution growth target of 4%-5% before acquisitions, we up our target price by $3 to $76.
Vodafone Group PLC (VOD) – Recent results have shown improving trends in VOD’s emerging market growth engines India and South Africa and signs of a turnaround in its more mature European business. We believe revenue momentum and good cost control will enable VOD to beat its EBIT guidance for FY 12 (Mar). As we roll forward our DCF analysis, we are raising our 12-month target price on the ADSs by $2 to $34. Combined with an above-average dividend yield that we see as well supported by cash flow, we view VOD as compelling.
