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The Right Chemistry for Growth and Income with 42% Upside Potential

What more can an income investor want than a dividend growing at 35% per year and price upside potential of 42% in the coming year.  This is exactly what is possible to owners of Celanese Corp. (NYSE: CE), a global producer of industrial chemicals.  While the current dividend yield is only 1.0%, it will likely continue to grow as EPS is projected to increase 14% in the next year.

The Company has increased its dividends by 140% in the past year and boasts of a 5-year average annual dividend growth rate of 35.1% per year.  The current payout ratio is 21.24%.  Celanese announced a 100% increase in the company’s quarterly common stock dividend on July 25, 2013.  The dividend rate increased from $0.09 to $0.18 per share of common stock on a quarterly basis and from $0.36 to $0.72 per share of common stock on an annual basis.

Celanese posted adjusted EPS of $1.20 per share in Q3, up from a $1.12 gain during the same quarter last year and beating the Capital IQ consensus by $0.05 per share.  Revenue for the manufacturer of thermoplastic polymers slid 1.0% year over year to $1.64 billion, roughly in-line with analyst forecasts.

Looking forward, CE said it expects per-share earnings to continue growing during FY14 through new products and productivity improvement.  Celanese has expanded its polyacetal manufacturing footprint in Asia through investments in joint venture projects in Malaysia, Korea, and Saudi Arabia.  The company signed manufacturing agreements with Malaysia’s Polyplastics Asia Pacific Sdn. Bhd, Korea’s Korea Engineering Plastics, and Saudi Arabia’s Ibn Sina.

We think Celanese can generate above-average revenue growth from geographic expansion and the development of new applications for its products. Due to its size, CE also enjoys a cost advantage in many of its markets. We believe the engineered plastics business has solid long-term growth fundamentals, and that acetate tow remains a stable cash-generating business. Additionally, the European economy seems poised for gradual recovery in 2014.

We look for operating EPS to rise to $4.55 this year, from $3.80 in 2012. Further growth is expected in 2014, with EPS forecast to reach $5.20.   Based on a PE of 15, the 12 month target price is projected to be $78, an increase of 42% from current trading levels.  The Stock has an equity summary score of 8.6out of 10 for a Bullish outlook among analyst.

Celanese Corp. is a global producer of industrial chemicals and has the number  one or two market share in a majority of its products.  Celanese strives to focus its businesses in areas where it has a clear and sustainable competitive advantage to generate long-term earnings growth.  It also continually seeks to optimize its business portfolio to achieve industry, cost and technology leadership while expanding its product mix into higher value-added products. CE’s geographically balanced global footprint is another aspect of its strategy that should fuel future earnings growth, and its global presence is aligned with the current and expected growth of its customers.

The strong cash flow results allowed Celanese to more actively utilize their balance sheet, deploying$96 millionof cash in the quarter to purchase approximately 2 million shares.  Celanese also maintained a cash balance of$1.1 billionand net debt balance of less than$2.0 billion.

The company will cease all manufacturing operations and associated activities at the acetic anhydride plant in Roussillon and at the vinyl acetate monomer (VAM) unit in Tarragona by the end of 2013, and Celanese will proceed to decommission both facilities.

The need for these closure projects emerged from an assessment of Celanese’s overall corporate strategy, which included an assessment of the company’s global manufacturing facilities. Specifically, in support of the company’s acetyl portfolio, the manufacturing footprint strategy favors integrated production sites that provide critical economies of scale.  Celanese expects savings from these closures to be in the range of US $20-30 million in 2014.

3 Dividend Stocks for a Weak Market

In recent weeks, the bears are starting to get the upper hand.  The S&P 500 may have problems keeping its 20% return year to date.  Investors should get more cautious with their stock holdings.  We believe that when pullbacks happen, dividend stocks fare better than others because their yields provide downside protection.  Then, how about stocks that have a current yield above 3.5%, have 10% earnings per share growth projections and have prices that are up more than 10% in the past 13 weeks.

Income provides a return when the market is vacillating on its next direction.  Add this to stocks in an uptrend and with projected growth, investors should be positioned for above market returns in the coming months.  Here are three stocks to watch;

Orchids Paper Products (TIS) has a high dividend yield of 5.05%.  The stock is up 15.9% in the last 13 weeks.  EPS is projected to increase 9.7% next year compared to this year.  Orchids provided investors with dividend increases in both the 1st quarter and 2nd quarter.  The company has increased dividends 75% in the past year.

Orchids Paper is a small cap with only $220 million in market cap.  The company established a new quarterly record for both total net sales and converted product net sales of $29.2 million and $27.8 million, respectively.  Net income per share for the second quarter 2013 was $0.39 per diluted share compared with $0.29 per diluted share in the same period in 2012.

 

Company efforts in new product development continue to enhance their product offering line-up for the mid and premium-tier markets which continues to resonate well with the market and is the major driver of recent business growth.

First Call has a strong buy recommendation with a 1.3 stock rating.

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Bank holding company UMPQUA Holdings (UMPQ) has a high dividend yield of 3.58%.  The stock is up 23.3% in the last 13 weeks.  EPS is projected to increase 10.1% next year compared to this year.  UMPQUA provided investors with dividend increases in both the 1st quarter and 2nd quarter.  The company has increased dividends 67% in the past year.

The Company had second quarter 2013 net earnings of $26.1 million, or $0.23 per diluted common share, compared to net earnings of $23.2 million, or $0.21per diluted common share for the first quarter of 2013, and $23.1 million, or $0.21 per diluted common share, for the same period in the prior year.

For the six months ended June 30, 2013, the Company reported net earnings of $49.2 million, or $0.44per diluted common share, compared to net earnings of $48.5 million, or $0.43 per diluted common share for the same period of the prior year.

It was another solid quarter for Umpqua, highlighted by strong earnings, increasing capital returns to shareholders, continued loan growth and the Financial Pacific Leasing acquisition. Umpqua Bank’s acquisition of FinPac which closed on July 1, 2013, has expected earnings accretion of at least 14% in the first full year.

Valassis Communications (VCI) has a high dividend yield of 4.35%.  The stock is up 13.1% in the last 13 weeks.  EPS is projected to increase 11.6% next year compared to this year.  Valassis started paying dividends to investors in the 4th quarter of 2012.  The Company expects to use approximately 35-40% of free cash flow* for stock repurchases during 2013.

Valassis, which sells space for advertising and coupons in its four-color booklets, reported a profit of $26.8 million, or $0.68 a share, compared with $21.7 million, or $0.51 a share, a year earlier.  Valassis’ second-quarter profit jumped 24% as the company came up against a year-earlier period bogged down by large one-time charges, while core earnings fell below analyst estimates.

Based on the current plan and outlook, the Company reiterated full-year 2013 guidance with earnings per share between $3.05 and $3.20,  adjusted EBITDA of between $290.0 million and $300.0 million, and capital expenditures of approximately $25 million.

Oaktree has Record Earnings and a Double-Digit Dividend Yield

Following 2013 results that represent record highs for any quarter or six-month period in the Company’s history, Oaktree Capital Group, LLC (OAK) is an income investment for both growth and high income.  The stock just recorded a 63% increase in revenues and has a current dividend yield of 11.1%.  In this case, it is better to buy the stock of Oaktree Capital than to buy the closed-end funds it operates.

Oaktree Capital is a leading global investment management firm focused on alternative markets, with $76.4 billion in assets under management as of June 30, 2013.  The firm emphasizes an opportunistic, value-oriented and risk-controlled approach to investments in distressed debt, corporate debt (including high yield debt and senior loans), control investing, convertible securities, real estate and listed equities.

In the second quarter of 2013, adjusted net income rose $131.5 million, to $297.0 million from $165.5 million in the second quarter of 2012, on a $214.0 million increase in total segment revenues. The 63% growth in revenues, to $555.1 million from $341.1 million, reflected a 162% gain in incentive income, to $338.1 million from$129.0 million, and a 49% increase in investment income, to $34.6 million from $23.2 million.

Driven by $4.7 billion of distributions to investors in closed-end funds, incentive income arose from funds in distressed debt, real estate and control investing strategies, and included $272.5 million from OCM Opportunities Fund.

Adjusted net income increased to $632.7 million for the six months ended June 30, 2013 from $339.1 million for the six months ended June 30, 2012, on a 74% rise in total segment revenues, to $1.1 billion.

Distributable earnings grew to $313.2 million in the second quarter of 2013 from $176.4 million in the second quarter of 2012, on higher incentive income and investment income proceeds.  For the six-month period, distributable earnings rose to $608.2 million in 2013 from $313.7 million in 2012. The 2013 results represented record highs for any quarter or six-month period in the Company’s history.

The stock still trades at a very reasonable valuation with the stock at a current PE of 9.45 and a price to sales ratio of 0.65.

More Special Dividends this Week

Primus Telecommunications Group, Incorporated (PTGI), a leading international wholesale service provider to fixed and mobile network operators worldwide, announced today that its Board of Directors has approved a special cash dividend of $8.50 per share on all issued and outstanding PTGi common stock. The special cash dividend will be paid on August 27, 2013 to holders of record of PTGi common stock as of August 20, 2013.

The dividend creates a current yield of 70%.  The special dividend comes after disappointing earnings.

PTGI shares are down market trading as it reports Q1 revenue of $51.3 million, down from $59.8 million a year prior. Net loss was $3.2 million, or $0.23 per share, compared to $6.9 million, or $0.50 per share.

I would PASS on the PTGI special dividend based on the poor EPS report.

Nature’s Sunshine Products, Inc. (NATR), a leading natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products, today reported its consolidated financial results for the second quarter, and declared a special one-time cash dividend of $1.50 per share, a regular quarterly cash dividend of $0.10 per share and a $10 million share repurchase program.

The combined $1.60 in dividends creates a current yield of 8.55%.  The dividend is payable on August 29, 2013 to shareholders of record as of the close of business on August 19, 2013. The amount of the cash dividends is expected to be approximately $25.6 million. In addition, the Board of Directors authorized a $10 million share repurchase program to be implemented over two years.

The special one-time cash dividend and share repurchase program is due to the Company’s strong cash flow and its record high quarter-end cash balance of $87.3 million, and the Board’s commitment to return capital to shareholders and its confidence in the long-term growth prospects of the Company’s business.

The stock trades at a PE ratio of 14 and a price to sales ratio of 0.78.

NATR has an equity summary score of 7.4 out of 10 for a Bullish outlook.

This Takeover Candidate Offers High Yield and High Growth

Investors looking for high yield and high growth stocks should consider NTELOS Holdings Corp (NTLS) as a possible portfolio addition.  For income, the stock boasts a healthy 8.95% dividend yield.   For growth, earnings per share are projected to grow 29%next year compared to the current year.  This is a combination that can create significant upside for the stock price.  In addition, there is considerable speculation that NTELOS may be acquired by a larger telecom provider.

First Call consensus has NTELOS earning $1.32 per share in 2014 which is an increase of 29% from its 2013 EPS.  The EPS growth will better support the current dividend payout ratio.  Investors can wait for a pullback to add new shares since NTLS shares are up 30% in the past three months due to talk of a takeover.

AT&T Inc.’s (T) deal to grab Leap Wireless for$1.2 billion in cash continues the U.S. wireless consolidation race and has Wall Street looking at other possible targets.  NTELOS is a name being mentioned as having attractive spectrum. The company is small, with just 451,000 total subscribers at the end of March and a market value of$360 million. By comparison, Verizon Wireless has more than 90 million contract customers.

Despite its size, NTELOS has connections to bigger players including a wholesale deal to provide Sprint (S) service in West Virginia and western Virginia.  It is also working with Dish Network Corp. (DISH) to co-develop a fixed-mobile broadband-service within its coverage territory.

Once completed, the service is expected to give NTELOS and Dish customers access to high-speed Internet, a service that is especially lacking in some of the rural areas NTELOS covers.  The agreement comes as Dish has been working to plug a significant hole in the services it provides, it can’t offer high-speed Internet competitive with cable providers.

NTELOS Holdings Corp., a leading regional provider of nationwide wireless voice and data communications and home to the “best value in wireless,” recently announced it will be added to the Russell Microcap® Index, effective at the close of the market on June 28, 2013.

NTELOS Holdings Corp., operating through its subsidiaries as “nTelos Wireless,” is headquartered in Waynesboro, VA, and provides high-speed, dependable nationwide voice and data coverage for approximately 451,000 retail subscribers based in Virginia, West Virginia and portions of Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. The Company’s licensed territories have a total population of approximately 7.9 million residents, of which its wireless network covers approximately 6.0 million residents. The Company is also the exclusive wholesale provider of wireless digital PCS services to Sprint Nextel in the Company’s western Virginia and West Virginia service area for all Sprint CDMA wireless customers.

Here is a Nice Dividend Capture for July

For investors looking to book a solid dividend, Himax Technology (NASDAQ: HIMX) is the place to be in July.  Himax Technology has a current dividend yield of 4.78%.  On June 17, 2013 the board of directors approved a dividend of $0.25 per share.  The dividend is payable on July 31, 2013 to shareholders of record on July 19, 2013.

The stock has recently pulled back to $5.22 and presents a nice dividend capture strategy as HIMX pays an annual dividend.  Himax has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.  The stock has a 12-month price target of $8.40.  The stock is up 188% in the past year.

HIMX is growing solidly, and has shown this by beating Q1 earnings estimates, despite the fact that last quarter was the slow quarter for most Asian companies.  Himax also expanded its profit margin by 5%. This stock’s growth should only continue with the massive amount of news catalysts on the horizon.

Himax recently announced the closing of the previously announced underwritten offering by selling shareholder Innolux Corporation (“Innolux”) of 25,399,753 American Depositary Shares (“ADSs”), including 3,313,011 ADSs sold pursuant to the underwriters’ over-allotment option. The underwriters have exercised in full their over-allotment option to purchase the 3,313,011 ADSs. Immediately following the closing, Innolux has ceased to be the Company’s shareholder. The Company did not sell any ADSs in the offering and did not receive any proceeds from the offering. Innolux’s sale of the ADSs will not result in dilution of the Company’s outstanding shares.

Himax Technologies, Inc. (HIMX) is a fabless semiconductor solution provider dedicated to display imaging processing technologies. Himax’s main products include display driver ICs and timing controllers used in TVs, laptops, monitors, mobile phones, tablets, digital cameras, car navigation, and many other consumer electronics devices.  Additionally, Himax designs and provides controllers for touch sensor displays, LCOS micro-displays used in palm-size projectors and head-mounted displays, LED driver ICs, power management ICs, scaler products for monitors and projectors, tailor-made video processing IC solutions and silicon IPs. The Company also offers digital camera solutions, including CMOS image sensors and wafer level optics, which are used in a wide variety of applications such as mobile phone, tablet, laptop, TV, PC camera, automobile, security and medical devices. Headquartered in Tainan, Taiwan, the Company has offices in Hsinchu and Taipei, Taiwan and in China, Korea, Japan and the US.

Investors can find High Yield here

For investors looking for high yield without the risk of rising interest rates, AllianceBerstein Holdings (AB) is definitely worth a look.  The stock has a nice 6.62% dividend yield that has increased 64% in the past year.  AB has an equity summary score of 9.8 out of 10 for a Very Bullish rating.

First Call consensus has EPS increasing 23% in 2013 and 13% in 2014.  Analysts have a 12-month price target of $28.

AllianceBernstein’s  first-quarter profit rose 44% as demand from institutional investors helped the money manager book its second-straight quarter of inflows.

Assets under management stood at $443.2 billion at the end of the quarter, up from $430 billion at the end of 2012 and $419.1 billion a year earlier. Market gains added $10.6 billion while the firm also drew a net $2.6 billion in investor cash.

Institutional demand accounted for the bulk of the inflow, contributing a net $3.3 billion and helping to offset a modest outflow from the firm’s private- client business.

“Momentum continued to build in our institutions channel, where gross sales nearly doubled year-over-year,” Chief Executive Peter Kraus said.

AllianceBernstein reported a profit of $38.5 million, or 38 cents a unit, versus a year-earlier profit of $26.7 million, or 26 cents a unit.  Net revenue rose 4% to $709.1 million. Analysts expected earnings of 35 cents a unit on $684 million in revenue.

Total net revenues were up 4%, year to year, in the first quarter, driven by base investment management fees and easy comparisons.  We expect revenues to be up in the mid- to high single digits in 2013 and 2014 given easier comparisons and contraction of equity assets to the point where fixed income inflows are able to offset equity outflows.

The company has made progress in improving efficiency from cost-cutting efforts and has recently seen an encouraging turnaround in asset flows, but there is still work to do to improve equity fund performance.

Look to this Shipper for High Yield

Investors looking for a high yield stock may want to check out Ship Finance International Ltd (NYSE: SFL).  The stock boasts a 9.59% dividend yield with EPS projected to grow 16% in 2014.  With 2 analysts upgrading the stock, SFL looks like a potential high yield stock that can sustain its EPS and dividend.

On February 25, Ship Finance International Ltd.’s fourth-quarter earnings jumped 69% as the tanker company benefited from a cash sweep agreement and a one-time gain from a sale.  Ship Finance, which owns and charters out large vessels that transport crude oil, in recent years has been diversifying its assets to include areas such as dry bulk and container ships. Though Ship Finance had seen a soft tanker market, the company said that the crude oil tanker market remained relatively firm.

Ship Finance is actively reviewing investment opportunities across its main market segments, while also closely monitoring the performance of its chartering counterparties in light of the “prevailing soft spot-market in some of the shipping segments.”  Ship Finance reported a profit of $51.1 million, or 60 cents a share, versus $ 30.2 million, or 38 cents a share, a year earlier. The latest period included $ 12.1 million from a cash sweep agreement with Frontline Ltd. and a $21.5 million gain on the sale of vessels.

Total operating revenue rose 2.1% to $77.7 million.  Analysts polled by Thomson Reuters most recently forecast earnings of 33 cents on revenue of $89.9 million.

First Call consensus has Ship Finance earning $1.71 in FY 2014 which is 16% above 2013 EPS.  First Call has a buy rating on the stock with a 2.2 rating.  The stock trades at a PE of 7 and 1.4 times book value.  Ship Finance has a 12-month price target of $18.70.

On April 20, 2013 Columbine Capital Services, Inc. upgraded SHIP FINANCE INTERNATIONAL LTD from NEUTRAL to FAVORABLE.

On April 12, 2013 Ford Equity Research upgraded SHIP FINANCE INTERNATIONAL LTD from HOLD to BUY.

This Lodging Stock is a Stable Growth and Income Play

RLJ Lodging Trust (RLJ) is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels.  The Company’s portfolio consists of 145 hotels in 21 states and theDistrict of Columbia, with a total of more than 21,600 rooms.  RLJ is a great growth and income stock as it is projected to increase EPS by 19% in 2013 while paying a steady 3.6% dividend yield.

The Company recently announced that it acquired the historicHumble Oil Buildingcomplex in downtownHouston, for a purchase price of$79.5 million, or approximately$151,000per key based on a combined forward room count of 528 keys.

The Humble Oil Buildingis a three-tower complex that occupies an entire city block in downtownHouston. The complex consists of an 82-unit apartment tower that will be converted to a 166-room SpringHill Suites and two existing hotels, the existing 191-roomCourtyard Houston Downtown Convention Center(“the Courtyard”) and the 171-roomResidence Inn Houston Downtown Convention Center(“the Residence Inn”). The purchase price represents a forward capitalization rate of approximately 10.1% for the Courtyard and 9.5% for theResidence Innbased on each hotel’s projected 2013 net operating income and applicable purchase price allocation. The Company purchased this portfolio of assets with its revolving credit facility.

“Our ability to execute this off-market transaction required the expertise, experience, and relationships that are unique to RLJ,” commentedThomas J. Baltimore, Jr., President and Chief Executive Officer. “Acquiring theHumble Oil Buildingcomplex represents a value-add opportunity. Both existing hotels have notable upside potential and our extensive experience managing complex renovations will enable us to deliver another conversion property that will help drive economies of scale.”

Adjusted FFO for the three months ended December 31, 2012, increased $13.4 million to $50.7 million, representing a 35.9% increase over the comparable period in 2011. For the twelve months ended December 31, 2012, Adjusted FFO increased $43.5 million to $185.6 million, representing a 30.6% increase over the comparable period in 2011. Adjusted FFO per diluted share and unit for the three and twelve months ended December 31, 2012, was $0.48 and $1.74, respectively, based on the Company’s diluted weighted-average shares and units outstanding of 106.8 million and 106.6 million for each period, respectively.

Net income attributable to common shareholders for the three months ended December 31, 2012, was $13.7 million, compared to a loss of $1.3 million in the comparable period in 2011. For the twelve months ended December 31, 2012, net income attributable to common shareholders was$41.3 million, compared to$11.3 million for the comparable period in 2011.

First Call consensus has the company producing $2.08 in EPS in 2013 which is a 19% increase from the prior year.  EPS are projected to be $2.34 in 2014 which is a nice 12% increase from 2013.  First Call Analyst currently have a buy rating with a 2.0 rating.  RLJ has an equity summary score of 7.2 out of 10 for a Bullish outlook.  The stock is currently trading near $22.50, 10.8 times 2013 EPS and 9.6 times 2014 EPS.

This Stocks offers a 4% Yield and 13% Upside

AbbVie (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013.  AbbVie is worth a look for the growth and income investors as it has a 4.2% dividend yield and a price target with 13% upside potential.

AbbVie’s most important product is Humira, an injectable biologic TNF (tumor necrosis factor) blocker treatment for rheumatoid arthritis (RA) and similar conditions, with sales of $9.3 billion in 2012, up from $7.9 billion in 2011.We estimate that Humira accounts for more than half of the global prescription pharmaceuticals market for rheumatoid arthritis. Besides moderate to severe RA in adults, Humira is also approved for eight other uses, including juvenile idiopathic arthritis, plaque psoriasis, psoriatic arthritis, ankylosing spondylitis, ulcerative colitis, Crohn’s disease in adults, juvenile Crohn’s disease and axial spondyloarthritis.

AbbVie’s strategic objectives include expanding Humira’s sales through greater penetration of emerging markets, increased emphasis on earlier diagnosis of autoimmune patients, and new indications. ABBV also plans to advance its R&D pipeline through internal development or through collaborations and licensing agreements. From 2013 through 2016, the company plans to launch five significant new products. The company also plans to maximize efficiency by streamlining the supply chain and optimizing residual value when products near the end of exclusivity.

In January 2013, ABT said that global sales of branded drugs that now belong to ABBV rose 7.4% to$5.14 billionin Q4, topping the$4.8 billionestimate of Wells Fargo analysts. Sales of Humira, ABBV’s leading product, increased 23% to$2.68 billion, about$200 millionabove Wells Fargo’s estimate.

The company estimated 2013 adjusted earnings at $3.03 to $3.13 a share, while analysts polled by Thomson Reuters expect $3.08 a share. Abbott had previously said fourth-quarter sales of Humira jumped 23% to $2.68 billion.  AbbVie said it expects the drug’s sales to increase by a low double-digit percentage in 2013.  The company also said it plans to initiate several Phase III programs this year, including atrasentan for diabetic kidney disease and ABT-199 in chronic lymphocytic leukemia.

The stock is reasonably priced with a current PE of 11.6 compared to an industry PE of 19.7.  AbbVie has a 12-month target price of $43 applies a modest premium to peers P/E of 13.4X to our $3.20 EPS estimate for 2014. The $1.60 annual dividend presently yields 4.2%.We think ABBV’s $7.2 billion cash position enables it to do accretive acquisitions and stock repurchases.  ABBV has an equity summary score of 9.9 out of 10 for a Very Bullish outlook.

The board of directors of AbbVie declared a quarterly cash dividend and also authorized a share repurchase program of up to $1.5 billion of the Company’s outstanding common stock.  The cash dividend of $0.40 per share is payable May 15, 2013 to stockholders of record at the close of business on April 15, 2013.  AbbVie was named to the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.  AbbVie was included as a result of the Index’s change in its treatment of spin-off companies.

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