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Best Income Stocks for 2013 – Wyndham Worldwide (WYN)

One of the world’s largest hospitality companies, Wyndham Worldwide (NYSE: WYN) provides a wide range of hospitality products and services through its global portfolio of world-renowned brands. The world’s largest hotel company based on the number of properties, Wyndham Hotel Group is home to many of the world’s best-known hotel brands, with over 7,340 franchised hotels and 627,400 hotel rooms worldwide.  Strong lodging demand, particularly among business travelers, has helped drive revenue higher in recent quarters for the operator of the Ramada, Howard Johnson and Days Inn hotel chains.

Wyndham Worldwide made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Wyndham Worldwide has a potential 11.8% combined earnings accretion and dividend yield, according to Goldman.  Wyndham’s board recently raised its quarterly dividend to $0.29 a share from $0.23, an increase of 26%. Wyndham has a current dividend yield of 1.55% with a 5-year average dividend growth rate of 42%.

Trading near the $60, the stock’s 12-month price target is $75.

Wyndham Worldwide Corp.’s fourth-quarter profit improved 45% as the hotel company’s revenue was boosted by contributions from its vacation ownership and lodging segments.

Wyndham recorded a profit of $81 million, or $0.57 a share, up from $56 million, or $0.37 a share, a year earlier. Excluding acquisition and restructuring costs, and other items, per-share earnings rose to $0.63 from $0.47 a year earlier.  Revenue rose 9.4% to $1.09 billion.

The company raised its 2013 guidance, now expecting$3.57 to $3.70a share in earnings and revenue of$4.925 billion to $5.1 billion. Wyndham in October predicted$3.50 to $3.60a share and$4.9 billion to $5.05 billion, respectively.

Strong lodging demand, particularly among business travelers, has helped drive revenue higher in recent quarters for the operator of the Ramada,Howard JohnsonandDays Innhotel chains. The company late last year acquired Shell Vacations LLC, a vacation-ownership club and property management group, for about$102 millionin cash as Wyndham looked to expand its fee-for-service businesses.

The vacation-ownership business, Wyndham’s largest business by revenue, saw revenue rise 12% to$590 million. Excluding Shell Vacations, the rise was 6%.

Lodging revenue rose 19% to$223 million, benefiting from gains in revenue per available room. Vacation exchange and rentals revenue rose 0.6% to$293 million, but in constant currency and excluding acquisitions, revenue was flat from a year ago.

Best Income Stocks for 2013 – Coca-Cola Enterprises Inc. (CCE)

Coca-Cola Enterprises, Inc. (NYSE: CCE) produces, distributes, and markets nonalcoholic beverages. It provides still and sparkling waters, juices, sports drinks, juice drinks, coffee-based beverages, and teas.   Coca-Cola Enterprises is a great total income play with a 13.0% payoff and a projected increase in EPS of 10% in 2013 and 2014.

Coca-Cola Enterprises made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Coca-Cola Enterprises is projected to have a 11.1% earnings accretion and a 1.9% dividend yield, for a total combined 13.0% payoff.  The Atlanta-based bottler of Coca-Cola is now trading in the mid-$30 range and has an upside of about 19%.

Coca-Cola Enterprises has an equity summary score of 7.6 out of 10 for a Bullish outlook.  First Call Analyst consensus has a HOLD recommendation with a 2.5 rating.

“Our 2012 results will reflect our ability to deliver solid earnings growth by closely managing each aspect of our business and continuing world class marketplace execution in difficult operating conditions,” said John F. Brock, chairman and chief executive officer. “Going forward, we will rely on our global operating framework, our successful brands, increased effectiveness through our business transformation effort, and the skill and dedication of our employees.

Coca-Cola Enterprises expects FY12 EPS at the high end of its previously disclosed range of $2.20 – $2.24, versus the Capital IQ consensus estimate of $2.23.  Net sales and operating income are expected to grow in a low to mid-single-digit range.

It also anticipates FY13 comparable and currency neutral EPS to grow about 10%. Net sales and operating income are expected to grow in a mid-single-digit range.

CCE intends to increase its 2013 dividend payout to a range of 30% to 35% of 2013 comparable and currency neutral earnings per share.  This would be the sixth straight year of dividend increases and represents an expected annualized 2013 dividend increase of at least 15 percent above 2012.

The company has completed its most recent share repurchase program by reaching the cumulative 65 million maximum number of repurchased shares authorized by the Board of Directors.  During 2012, this resulted in 27 million shares or $780 million in shares repurchased.

Coca-Cola Enterprises Inc.’s board approved a new $1.5 billion stock repurchase program.  The company said it expects to repurchase at least $500 million of stock during 2013.

Coca-Cola Enterprises, which was spun out of Coca-Cola Co. (KO) in 1986, sold its North American operations to Coca-Cola in 2010. Western Europe’s economic woes have posed a threat to demand for its soft drinks. The bottler also has grappled with higher taxes inFrance, aggressive competitive spending in the U.K. and the negative impact of currency translation.

The company reported in October its third-quarter earnings fell 7.4% as revenue slid 3.3%, though volume rose.  The Company will report 4Q earnings on February 7, 2013.

The soft drink industry is mature and highly concentrated. CCE conducts its business primarily under bottle contracts with KO. It has the exclusive right to produce and market CocaCola soft drinks in authorized containers in specified territories; KO has the ability, at its sole discretion, to set prices for concentrates and syrups. CCE’s competitors include the local bottlers of competing products and manufacturers of private label products. It competes with bottlers of products of PepsiCo, Inc. (PEP) and its largest bottler Pepsi Americas (PAS), Nestle S.A. (NSRGY), Groupe Danone, Kraft Foods Inc. (KFT), and private label products, including those of some of its customers. In some territories, CCE sells products it competes against in other territories.

Best Income Stocks for 2013 – Validus Holdings (VR)

Validus Holdings, Ltd. (NYSE: VR) is a provider of reinsurance and insurance, conducting its operations worldwide through two wholly-owned subsidiaries, Validus Reinsurance, Ltd. (“Validus Re”) and Talbot Holdings Ltd. (“Talbot”).  Validus Holdings is a great total income play with a a 13.9% payoff and an increase in EPS of 85% in 2013.

Validus Holdings made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Validus Holdings is projected to have a 10.6% earnings accretion and a 3.3% dividend yield, for a total combined 13.9% payoff. Based in Hamilton, Bermuda, the reinsurer is trading in the mid-$30 range and has a Goldman price target of $44.

Validus has an equity summary score of 8.4 out of 10 for a Bullish outlook.  First Call Analyst consensus have a BUY recommendation with a 2.0 rating.

Validus Holdings recently announced that it has completed its acquisition of Flagstone Reinsurance Holdings, strengthening Validus’ leading property catastrophe reinsurance and short-tail specialty insurance platform.  Due to the acquisition, EPS for 2013 are projected to increase 85% to $4.83 from $2.60 in 2012; and by 8.3% to $5.23 in 2014.

Validus Holdings, Ltd. reported net income available to Validus of $207.3 million, or $2.11 per diluted common share for the three months ended September 30, 2012, compared to $56.5 million, or $0.54 per diluted common share, for the three months ended September 30, 2011.  Net income available to Validus for the nine months ended September 30, 2012 was $499.2 million, or $4.88 per diluted common share compared to net (loss) attributable to Validus of$(6.0) million, or $(0.12) per diluted common share for the nine months ended September 30, 2011.

Net investment income for the three months ended September 30, 2012 was $25.5 millioncompared to $27.7 million for the three months ended September 30, 2011, a decrease of $2.3 million, or 8.1%. Net investment income for the nine months ended September 30, 2012 was$79.1 million compared to $84.2 million for the nine months ended September 30, 2011, a decrease of $5.1 million or 6.0%.

The Company has an annualized return on average equity of 18.9% and annualized net operating return on average equity of 16.4%.

Validus said that it expects to record a net negative financial impact from Hurricane Sandy, net of reinstatement premiums and reinsurance, retrocessional and other recoveries in the amount of $333.1 million. This amount is apportioned between VR’s operating segments as$256.2 million to the Validus Re segment and $76.9 million to the Talbot segment.

Validus Holdings recently announced that it has completed its acquisition of Flagstone Reinsurance Holdings, strengthening Validus’ leading property catastrophe reinsurance and short-tail specialty insurance platform.

Validus Holdings announced that its Board of Directors has declared a quarterly dividend of$0.25 per common share and $0.25 per common share equivalent for which each outstanding warrant is exercisable.  Validus has a dividend yield of 2.84%.

Best Income Stocks for 2013 – Domtar Corporation (UFS)

Domtar Corporation (NYSE: UFS) engages in the design, manufacture, marketing, and distribution of fiber-based products in North America.  The forestry industry is coming through a painful period marked by low-cost competition from emerging markets and the collapse of the U.S. housing industry.  However, the industry is rebounding as more companies are back on the growth track. One income stock to watch is Domtar Corporation (NYSE: UFS) as it offers a great total return in 2013.

Domtar made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Paper miller Domtar Corp. (UFS) is high on the total yield list with 15.6% due to a potential 13.5% earnings accretion from share buybacks and 2.1% from dividends.  Upside on the mid-$80 stock is roughly 3%.

Domtar has an equity summary score of 8.1 out of 10 for a Bullish outlook.  First Call Analyst consensus have a BUY recommendation with a 2.1 rating.

Under its stock repurchase program, Domtar repurchased, during the 3rd quarter, 578,328 shares of common stock at an average price of $75.42 per share.  Since the inception of the program, Domtar repurchased 8,135,157 shares of common stock at an average price of $80.53. At the end of the quarter, Domtar had$345 million remaining under this program.

Domtar has a current dividend yield of 2.16%.  The dividend was increased 28.6% in the past year with the most recent increase in Q2 2012.

Domtar Corporation  reported net earnings of $66 million ($1.84 per share) for the third quarter of 2012 compared to net earnings of $59 million ($1.61 per share) for the second quarter of 2012 and net earnings of $117 million ($2.95 per share) for the third quarter of 2011. Sales for the third quarter of 2012 amounted to $1.4 billion.

Excluding extraordinary items, the Company had earnings before items1 of $67 million ($1.87 per share) for the third quarter of 2012 compared to earnings before items1 of $59 million ($1.61 per share) for the second quarter of 2012 and earnings before items1 of $123 million ($3.10 per share) for the third quarter of 2011.

When compared to the second quarter of 2012, paper shipments increased 0.9% and pulp shipments increased 12.8%.

Domtar is projected to increase EPS by 12.8% to $7.38 in 2013 and 19% to $8.84 in 2014.  With a PE of 12, the 2013 price target is $88.56.

We believe Domtar’s focus will continue to be on improving its cost structure, rationalizing its assets to match supply with demand, maximizing its free cash flow generation, and seeking acquisitions that reduce earnings volatility.  Domtar has made solid progress on debt reduction, and we expect it to use its strong cash flows to accelerate share repurchases.

Company Profile:

Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®.  Domtar is a leading marketer and producer of a complete line of incontinence care products marketed primarily under the Attends® brand name.  Domtar owns and operates Ariva®, an extensive network of strategically located paper and printing supplies distribution facilities.

Best Income Stocks for 2013 – Assurant, Inc. (AIZ)

Assurant, Inc. (NYSE: AIZ), a premier provider of specialty insurance and insurance-related products and services, announces that its board of directors has declared a quarterly dividend of $.21 per share of common stock.  The dividend will be payable on March 11, 2013 to stockholders of record as of the close of business on Feb. 25, 2013.

Assurant made the Goldman Sachs “Best Income Stocks” list for 2013.  In a recent note, Goldman Sachs Group Inc. pointed out a number of stocks that could provide some easy money for investors by virtue of what the Wall Street bank calls a “social contract” — a combination of earnings appreciation due to expected share buybacks along with dividend yields.  It could be easy money, provided shares remain stable or rise, for investors looking for as close to a guarantee as equities can offer.

Assurant is projected to increase EPS by 11.6% in 2013, from $5.00 to $5.58.  Trading in the mid-$35 range, it has the highest potential earnings accretion due to share buybacks at 13.8% and a dividend yield of 2.6%, putting its total at 16.4%, according to Goldman.  AIZ has a 5-year average dividend growth rate of 11.8%.  Assurant has an equity summary score of 7.6 out of 10 for a Bullish Outlook.

Target price now is at $45, an increase of 25% from current levels.

AIZ pursues a differentiated strategy of building positions in specialized market segments for insurance products and related services in North America and selected international markets. The markets AIZ targets are generally complex, have a relatively limited number of competitors, and, according to the company, offer attractive profit opportunities. In these markets, AIZ’s strategy is to leverage the experience of its management team and apply its expertise in risk management, underwriting and business-to-business management, as well as its technological capabilities in complex administration and systems.

Assurant Specialty Property recently announced it expects losses from Superstorm Sandy to be in the range of $200 million – $220 million on a pre-tax basis and net of reinsurance.  Based on this estimate, the Company does not expect to exceed the retention limit of its 2012 property catastrophe reinsurance program.

A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the property/casualty and life/health insurance subsidiaries of Assurant, Inc.   Additionally, A.M. Best has affirmed the ICR of “bbb” and debt ratings of Assurant . The outlook for all ratings is stable.

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