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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.

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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.

This Healthcare REIT will Grow EPS 20% in 2013

Medical Properties Trust, Inc.’s (NYSE: MPW) continued successful execution of its growth and investment strategies have driven the Company’s strong results.  Since 2010, MPW has made hospital investments totaling more than $1.0 billion with average returns of more than 10%.  MPW has rewarded shareholders with a current dividend yield of 6.81%.

Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States.  It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers.

Third quarter 2012 total revenues increased 55% to $53.7 million compared with $34.6 millionfor the third quarter of 2011. Normalized FFO for the quarter increased 71% to $33.4 millioncompared with $19.5 million in the third quarter of 2011. Per share Normalized FFO increased 39% to $0.25 per diluted share during the 2012 third quarter, compared with $0.18 per diluted share in the third quarter of 2011. The FFO dividend payout ratio for the third quarter of 2012 was 80%, an 11% improvement compared with the second quarter of 2012.

Net income for the third quarter of 2012 was $31.5 million (or $0.23 per diluted share) compared with net income of $0.4 million (or $0.00 per diluted share) during the third quarter of 2011.

For the nine months ended September 30, 2012 normalized FFO was $85.5 million (or $0.65per diluted share) compared with $57.5 million (or $0.52 per diluted share) in the corresponding period in 2011. Revenue for the nine months ended September 30, 2012 was$145 million compared to $102 million in the corresponding period in 2011. Net income for the first nine months of 2012 was $61.3 million compared with $13.8 million in 2011.

Based upon its expected 2012 performance and placement of its properties under construction into service, MPW expects to enter 2013 with a Normalized FFO run rate of approximately $1.08 per diluted share. This does not include the impact of any potential 2013 acquisitions or financing activities.  This is an increase of 22.81% next year compared to 2012.

MPW has an equity summary score of 8.6 out of 10 for a Bullish outlook.  Based on a PE of 14, MPW has a 12-month price target of $15.

The House offers an $8.00 Special Dividend

Wynn Resorts (WYNN) announced today that the Company has approved an $8.00 cash dividend, which includes the $0.50 per common share quarterly dividend. This dividend will be payable on November 20, 2012, to stockholders of record on November 7, 2012 and the stock will begin to trade ex-dividend on November 5, 2012.  Wynn has a current dividend yield of 1.79%.  The $8.00 special dividend is a yield of 6.7%.

Additionally, the Company plans on increasing its quarterly dividend to $1.00 per share in 2013.

Net revenues for the third quarter of 2012 were $1,298.5 million, compared to $1,298.3 millionin the third quarter of 2011. Adjusted property EBITDA  was $402.6 million for the third quarter of 2012, compared to $381.1 million in the third quarter last year, as Wynn Las Vegas’ EBITDA increased $25.3 million.

Long-term growth potential of the Macau market remains solid. We also remain encouraged by the company s strong brand name, healthy balance sheet, strong cash flow position, relatively low capital requirements and its ability to perform in a difficult operating environment.

Wynn Resorts has an equity summary score of 7.3 out of 10 for a Bullish outlook.

Buy This Stock with a 7% Dividend Yield for Monthly Dividends

Home Loan Servicing Solutions (HLSS) is an internally-managed owner of non-agency mortgage servicing assets with historically stable valuations and cash flows.  HLSS’ assets are predominately mortgage servicing advances that, along with the related servicing rights, are over-collateralized 30 times by residential real estate. HLSS’ objective is to generate stable, recurring fee-based earnings and dividends throughout the economic cycle.  HLSS is a small cap stock with a market cap of $529 million.

HLSS reported net income of $6.6 million, or $0.37 per ordinary share, for the third quarter of 2012 which was 12% higher than Q2 2012 of $4.7 million, or $0.33 per ordinary share, its first full quarter of operations.  HLLs reported net income of $1.3 million, or $0.31 per share based on 4.2 million weighted average shares outstanding, for the first quarter of 2012.

On October 1, 2012, the Company’s Board of Directors declared a monthly dividend of$0.11 per ordinary share with respect to each of October, November and December 2012.  HLSS has an annual dividend yield of 7.10%.

Home Loan Servicing received gross proceeds of $249.9 million in connection with the follow-on offering of 16,387,500 shares at $15.25 per ordinary share on September 12, 2012. Proceeds from the offering were used to acquire mortgage servicing assets related to non-agency mortgage loans.

On October 19, 2012 Barclays Capital upgraded HOME LOAN SERVICING SOLUTIONS from EQUAL WEIGHT to OVERWEIGHT.

On October 16, 2012 Zacks Investment Research, Inc. upgraded HOME LOAN SERVICING SOLUTIONS from HOLD to BUY.

On October 16, 2012 Merrill Lynch initiated coverage for HOME LOAN SERVICING SOLUTIONS with a BUY recommendation.

First Call analysts have a BUY recommendation with a 2.0 stock rating.

Impact of Share Buyback on Annaly Capital

Annaly Capital Management, Inc. (NLY) announced that its Board of Directors has authorized the repurchase of up to $1.5 billion of its outstanding common shares over a 12 month period.  Annaly currently has 975 million shares outstanding with a market cap of $15.59 billion.  The buyback is 9.62% of the current market cap.

Based on FY 2013 earnings projections, the buyback will have an EPS accretion of 10.64%.  By adding the accretion with the current dividend yield of 12.5% the total return will be 23% without changing the PE ratio.  It will be hard to find a better high yield investment with this type of potential.

Zacks Investment has Annaly rated as neutral or hold with a 12-month price target of 18.30.  The target price is 15.6% higher than the current market price.

The current low interest rate environment has reduced potential investment returns, only partially offset by low short-term funding costs.  Prepayment rates on residential mortgages have also recently increased as agencies complete programs to repurchase delinquent mortgages and stabilize housing markets.  As a result, we expect net interest margins to narrow moderately over the next 12 months. Longer term, we think Annaly’s conservative financial posture places it in a strong position to expand its portfolio of agency mortgage backed securities once investment markets become more attractive. We think Annaly can augment investment income with higher fees from an expanding portfolio of assets under management for third parties.

Q3 earnings are expected to be announced after market hours on October 29, 2012.  Investors should hold up new purchases until the Q3 results.

Here is a link to the best mortgage REITs for the next quarter.

Buy This Stock for a 16% Dividend Yield

New York Mortgage Trust (NYMT) has priced its underwritten registered public offering of 13.5 million shares of common stock at a public offering price of $6.89 per share.  Currently the shares are trading at $6.46 so investors can buy the stock below the IPO price.  One of the best times to buy shares is when they sale shares to raise funds.  Typically, the stock price will sell off when new shares are made public creating a cheaper buying price.

New York Mortgage will report Q3 earnings on October 30.  The Company reported Q2 net income attributable to common stockholders of $5.1 million, representing net income per weighted average share of $0.34 for the quarter ended June 30, 2012, as compared to$4.2 million of net income attributable to common stockholders and net income per weighted average share of $0.44 for the quarter ended June 30, 2011.

New York Mortgage has a current dividend yield of 16%.  The dividend was increased 8.0% in Q2 2012.  On September 18, 2012 the board of directors at New York Mortgage Trust approved a dividend of $0.27 per share.

Here are the recent analyst actions:

On October 1, 2012 Thomson Reuters/Verus upgraded NEW YORK MORTGAGE TRUST INC NEW from SELL to BUY.

On September 28, 2012 Ativo Research upgraded NEW YORK MORTGAGE TRUST INC NEW from FAVORABLE to MOST FAVORABLE.

New York Mortgage has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.  First Call analysts have a BUY recommendation with a 2.0 rating.

New York Mortgage has a 12-month price target of $8.

Be Prepared for Earnings Season with these Stocks

The overall tone at the start of the earnings season is looking downbeat.  The S&P 500 index is on pace for its fourth day of declines over concern the global economic slowdown was hurting profits and causing companies to lower their outlooks.  The index is testing the technical support level of 1,440.  If the overall earnings picture does disappoint, the market can break the support level and fall into correction territory.

But as important as beating consensus earnings expectations for the third quarter are, it is even more important to provide reassuring enough guidance for the fourth quarter and beyond.  The overall earnings scorecard for the third quarter is that we have 28 companies from the S&P 500 already report results as of this morning (October 10), with total earnings down 4.9% from the same period last year and less than half of the companies beating earnings expectations.

It is still early in the earnings season, but if the quality of guidance remains weak, then estimates for the fourth quarter will have to come down from current expectations.  Prudent investors will want to protect against this potential decline by seeking safety in high quality dividend stocks.  Here are some stocks to consider if the earnings season disappoints and the markets pullback from current levels.

Food producer Conagra Foods (CAG) is showing price strength in the past few weeks on the heels of several analyst upgrades.   Conagra beat Q1 earnings and raised 2013 earnings outlook.  In addition, Conagra raised its dividend 4% and now has a dividend yield of 3.60%.  The Company has a low beta of 0.46 meaning it has low price volatility compared to the overall market.  Conagra has an equity summary score of 9.6 out of 10 for a VERY Bullish outlook.

Ketchup maker H.J. Heinz Co. (HNZ) has a flat stock price which is up only 5% year to date but it is a stable stock with a low beta of 0.50.  Heinz is continuing to exhibit strong sales in emerging markets, where organic sales rose 19.3% last quarter.  Heinz is increasing marketing efforts in the U.S. as shoppers remain frugal with their grocery budgets.  The Company has a current dividend yield of 3.63% that was increased 7.3% in the past year.  Heinz has an equity summary score of 9.1 out of 10 for a VERY Bullish outlook.

Medical device maker Medtronic (MDT) has a 1-year total return of 32%. However, it is still considered a low volatility stock with a beta of 0.67.  Medtronic just agreed to buy China Kanghui Holdings (KH) for $816 million in cash, in a growth move to enter China’s medical device market to accelerate its overall globalization strategy.  The Company has a current dividend yield of 2.41% that was increased 7.2% in the past year.  Medtronic has an equity summary score of 9.1 out of 10 for a VERY Bullish outlook.

Everyone’s favorite tobacco stock Altria Group (MO) is always a stable stock.  Altria has a low beta of 0.27.  Altria’s Board of Directors in August approved a 7.3% increase to their quarterly dividend.  Altria has a current dividend yield of 5.25%.  Altria has an equity summary score of 7.9 out of 10 for a Bullish outlook.

Inteliquent Offers a 33% Special Dividend

Inteliquent (NASDAQ: IQNT), a leading provider of global interconnection and interoperability solutions, today announced that its Board of Directors has declared a special one-time cash dividend of $3.00 per share, or approximately $97 million in the aggregate. The dividend will be funded with available cash on hand.

The payment date for the special one-time cash dividend is October 30, 2012. At $3.00 per share, the dividend represents approximately 33% of the Company’s closing stock price onOctober 3, 2012.

First Call analysts have a consensus Hold recommendation with a 2.9 stock rating.  The mean 12-month price target is $13.

Recently, Inteliquent announced certain changes to its management team.  Surendra Saboo, the Company’s President and Chief Operating Officer, informed the Company of his decision to step down as President and Chief Operating Officer effectiveOctober 1, 2012.  In addition, Robert M. Junkroski, the Company’s Chief Financial Officer, informed the Company of his decision to step down as Chief Financial Officer effectiveOctober 1, 2012. It is anticipated that Dr. Saboo and Mr. Junkroski will remain employed with the Company until November 1, 2012 to assist with the transition of their responsibilities.

Get a 10% Dividend Yield with Combined Special and Regular Dividend Payout

Watsco, Inc. (WSO) announced today that the Company’s Board of Directors declared a special cash dividend of $5.00 per share, totaling approximately $172 million, and a quarterly cash dividend of 62 cents per share, both payable on October 31, 2012 to shareholders of record at the close of business on October 15, 2012.

Watsco has paid dividends for over 35 consecutive years and has paid an increasing dividend over the last 11 years. The special dividend of $5.00 represents approximately two years of dividends based on the current annual dividend rate of $2.48 per share. The Company anticipates it will continue to pay quarterly cash dividends, but on a more moderate basis beginning in 2013, subject to the Company’s financial position, government tax policy and general economic conditions.

The special dividend of $5.00 is a current dividend yield of 6.5% and the regular dividend yield is 3.27%.  Combined, the dividends will yield nearly 10%.

Watsco improves indoor living and working environments with air conditioning and heating solutions that provide comfort regardless of the outdoor climate. Our solutions also promote healthier indoor spaces by removing pollutants from the indoor air that can lead to asthma, allergies and reductions in productivity.

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