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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.

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.

A New Special dividend of $10 or 64% Yield – If You Dare

Sycamore Networks, Inc.  (NASDAQ: SCMR) announced that, on September 19, 2012, its Board of Directors approved a special cash distribution of $10.00 per share of common stock. The cash distribution will be paid on October 11, 2012 to stockholders of record as of October 1, 2012. In accordance with NASDAQ Rule 11140(b), the ex-dividend date will be October 12, 2012, the first business day following the payment date for the cash distribution.

The special dividend has a current yield of 64%.  Sycamore Networks has a market cap of $423 million.  The 12-month price target is $16.25.  Sycamore Networks has an equity summary score of 0.4 for a very bearish outlook.  If you dare, get in and out of this stock for the special dividend but do not expect to hold longer than ex-dividend period.

Sycamore Networks also announced revenue for its fiscal fourth quarter and year ended July 31, 2012 of $16.8 millionand $57.3 million, respectively. This compares to $13.0 million and $48.7 million for the comparable 2011 fiscal periods.

Sycamore Networks develops and markets intelligent bandwidth management solutions for fixed line and mobile network operators worldwide.  They also develop and market a mobile broadband solution designed to help mobile operators reduce congestion in mobile access networks. Sycamore products enable network operators to efficiently and cost-effectively provision and manage network capacity to support a wide range of converged services such as voice, video and data.

3 High Yield REITs with a Bullish Outlook

Shares of high yielding REITs have been relatively flat in August.  The Vanguard REIT ETF (VNQ), which tracks the performance of an index that measures the performance of publicly traded equity REITs, is up over 14 percent this year, nearly double the Dow Jones gain of 8 percent over the same period.  Investors have looked to mortgage REITs to take advantage of the recovering U.S. housing market. Mortgage REITs do not directly invest in real estate but invest in the mortgages on real estate properties.

While the housing market has gone from bad to less bad, these REITs have just declared higher dividends for their investors.  Each of these REITs has high dividend yields over 10% with a Bullish outlook.

Newcastle Investment Corp. (NYSE: NCT) announced that its Board of Directors has declared a quarterly dividend of $0.22 per common share for the third quarter of 2012, representing a 10% increase from the prior quarter’s dividend of $0.20per common share. The dividend is payable on October 31, 2012 to shareholders of record on October 1, 2012.  Newcastle has a current dividend yield of 10.3%.

Newcastle Investment announced that it has completed the sale of 100% of its interests in CDO X in connection with the liquidation and termination of CDO X.  Newcastle received $130 million for $89.75 million face amount of subordinated notes and all of its equity in CDO X.  The sale and resulting deconsolidation of CDO X from the Company’s balance sheet will eliminate the impact of CDO X’s negative net book value and generate an approximately $200 million gain for the third quarter.

Newcastle has an equity summary score of 8.7 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 1.7.  Newcastle has a 12-month price target of $8.75.

Newcastle Investment (operated as a REIT) focuses on investing in and actively managing opportunistic investments in real estate related assets. The Company primarily invests in two distinct areas: (1) Residential Servicing and Securities and (2) Commercial Real Estate Debt and Other Assets.

The Board of Directors of CreXus Investment Corp. (NYSE: CXS) declared the third quarter 2012 common stock cash dividend of $0.32 per common share.  This dividend is payable October 25, 2012 to common shareholders of record on October 1, 2012. The ex-dividend date is September 27, 2012.

This is an 18.5% increase from the prior dividend of $0.27.  CreXus Investment has a current dividend yield of 10.2%.  EPS is projected to increase 21% in 2013 and 18% in 2014.

CreXus has an equity summary score of 7.6 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 2.3.  CreXus has a 12-month price target of $12.50.

CreXus (operated as a REIT) acquires, manages and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, commercial real property, commercial mortgage-backed securities and other commercial and residential real estate-related assets.

New York Mortgage Trust, Inc. (NYMT) announced that its Board of Directors declared a regular quarterly cash dividend of $0.27 per share on shares of its common stock for the quarter ending September 30, 2012. The dividend will be payable on October 25, 2012 to common stockholders of record as of September 28, 2012.  New York Mortgage has a current dividend yield of 14.5%.

New York Mortgage has completed an underwritten registered public offering of 10,000,000 shares of common stock at $6.73 per share.  New York Mortgage also granted the underwriters an option to purchase up to an additional 1,500,000 shares of common stock.  The proceeds will be used to purchase more assets.

New York Mortgage has an equity summary score of 9.0 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 2.0.  New York Mortgage has a 12-month price target of $8.25.

New York Mortgage invests in mortgage-related and financial assets and targets multi-family CMBS and Agency RMBS, including Agency RMBS consisting of adjustable-rate and hybrid adjustable-rate RMBS and Agency IOs consisting of interest only and inverse interest only RMBS that represent the right to the interest component of the cash flow from a pool of mortgage loans.

Mortgage REITs are Still a BUY Following QE3

Last week, the Fed announced it will purchase an additional $40 billion per month of Agency MBS. The purchase time frame is open-ended, but will be reviewed as economic developments dictate. In addition to additional purchases, the Fed also extended the commitment to keep interest rates low to at least mid-2015.  We believe that the FED decision is a positive for Mortgage REITS.

In the short term, we may see some profit taking.  Longer term, we believe the technical picture appears extremely strong and fundamentals such as carry and prepays remain favorable.

In addition, investors have looked to mortgage REITs to take advantage of the recovering U.S. housing market. Mortgage REITs do not directly invest in real estate but invest in the mortgages on real estate properties.  The Vanguard REIT ETF — which tracks the performance of an index that measures the performance of publicly traded equity REITs — is up over 15 percent for the year, outperforming the Dow Jones Industrial by a large margin.

We see AMTG, MTGE and AGNC as best positioned to benefit from the announcement given the mix of lower coupon fixed-rate MBS in the portfolio.  As is the case, the positives for book value are offset by lower reinvestment yields on new MBS purchases given the spread tightening.

Apollo Residential Mortgage, Inc. (NASDAQ: AMTG) is a real estate investment trust that invests in and manages residential mortgage-backed securities and other residential mortgage assets throughout the United States.  Apollo Residential Mortgage is trading at $22.488, near its 52-week high.  Apollo Residential Mortgage has a current dividend yield of 13.97%.  Apollo Residential Mortgage is rated a 1.8 (STRONG BUY rating) by First Call analysts.

American Capital Mortgage Investment Corp. (NASDAQ: MTGE) is a real estate investment trust formed in 2011 that invests in and manages a leveraged portfolio of agency mortgage investments, non-agency mortgage investments and other mortgage-related investments.  American Capital Mortgage is trading at $23.23, near its 52-week high.  American Capital Mortgage has a current dividend yield of 13.73%.  American Capital Mortgage is rated a 2.1 (BUY rating) by First Call analysts.

American Capital Agency (NASDAQ: AGNC) invests only in fixed-rate agency securities where payments are guaranteed by the U.S. government or government-owned entities, such as Fannie Mae (FNMA), Freddie Mac (FHLMC) and Ginnie Mae (GNMA).   American Capital Agency is trading at $36.49, near its 52-week high.  American Capital Agency has a current dividend yield of 13.7%.  American Capital Agency is rated a 2.2 (BUY rating) by First Call analysts.

American Eagle (AEO) to Pay a Special Dividend

American Eagle Outfitters, Inc. (NYSE: AEO) announced that its board of directors declared a special cash dividend of $1.50 per share and a regular quarterly dividend of $0.11 per share.  This marks the company’s 33rd consecutive quarterly dividend. The total cash dividend of $1.61 is payable on October 10, 2012, to stockholders of record at the close of business on September 26, 2012.  This is a 6.8% dividend yield based on the current stock price.

American Eagle continues to receive upbeat commentary from Wall Street, with Sterne Agee today upgrading the teen-apparel retailer to buy and edging up its price target to $27 from $25 amid its growth plans and merchandising efforts.

Meanwhile, “CEO Robert Hanson’s new financial goals, if realized, suggest a strong outlook ahead.” AEO has been seen not marking down as much as rivals during back-to-school, and less so than last year, meaning the company looks to still be gaining market share while bolstering margins. The stock has gone nearly straight up the past year, more than doubling during that time.

American Eagle reported Q2 revenue of $739.68 million, up from last year’s $669.12 million and over analyst estimates of $719.29 million. The company met on earnings, at $0.21. In Q2 of last year, AEO brought in $0.10 per share.

AEO said for Q3 is expects EPS in the range of $0.37 to $0.38, compared to $0.30 last year and for FY2012 is raising its EPS guidance to a range of $1.33 to $1.36, compared to a $0.97 last year. Analysts are expecting earnings of $0.37 per share in Q3 and $1.32 for the year.

American Eagle has an equity summary score of 9.3 out of 10 for a VERY Bullish Outlook.  First Call analyst consensus has a rating of 1.9 for a BUY recommendation on American Eagle.

2 Dividend Stocks with Growing Payouts

While dividend yields continue to be depressed due to rising prices in known income stocks, there are some stocks flying under the radar with good dividend prospects.  These stocks are frequently overlooked by income investors who are looking at the widely held blue-chip stock selections.  These companies continue to focus on growing their business in their core areas year after year.  Investors should take a look at these 2 companies that are producing excellent income growth and increasing dividends.

Calumet Specialty Products Partners (CLMT) is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feed stocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel.

Calumet is growing sales through business acquisitions including the recent agreement to acquire Royal Purple, Inc., a manufacturer of lubricants for automotive and industrial applications, for a total consideration of $335 million and an agreement to acquire Montana Refining Company, Inc. for aggregate consideration of $120 million.  Calumet is projected to have an earnings growth rate of 29% over the next 3-5 years.  Yet, Calumet is currently trading at a PE of 8.27 compared to the industry average of 13.

For the six months ended June 30, 2012, Calumet reported net income of $117.6 million compared to a net loss of $3.5 million for the same period in 2011.  We see specialty products sales increasing 13% to 14% in 2012, based on improving demand and contributions from recent acquisitions. We believe the partnership will benefit from the continued strength in the drilling fluid market, reflecting higher shale production.

On July 20, 2012, the Company declared a quarterly cash distribution of $0.59 per unit on all outstanding units or $35.9 million for the second quarter of 2012. This quarterly distribution represents an increase of 5.4% over the first quarter of 2011 and a 19.2% increase from the second quarter of 2011.

Calumet has a dividend yield of 9.1% and has increased its dividend 31% over the last 3 years.  Calumet has a 12-month price target of $30, a 15% increase from the current trading price.

Healthcare Services Group, Inc. (HCSG) provides housekeeping, laundry, linen, facility maintenance, and dietary services to nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States.  Healthcare Services Group, with a market cap of $1.43 billion, continues to grow revenues and income while increasing dividends each quarter.

Healthcare Services Group reported that revenues for the three months ended June 30, 2012 increased over 26% to$267,108,000 compared to the same 2011 period.  Net income for the three months ended June 30, 2012 increased 15% to $11,320,000 or $0.17 per share, compared to the 2011 second quarter.  Healthcare Services Group is projected to increase EPS 21% next year.

Healthcare Services Group increased its quarterly cash dividend to $0.16375 per common share. This represents the 37th consecutive regular quarterly cash dividend payment, as well as the 36th consecutive increase since the Company’s initiation of regular quarterly cash dividend payments in 2003.  Healthcare Services Group has a current dividend yield of 3.11% with a 5-year average dividend growth rate of 18%.

Healthcare Services Group has a 12-month price target of $24 based on projected EPS.  Healthcare Services Group has an equity summary score of 7.7 out of 10 for a Bullish outlook.

Bassett Furniture Continues Turnaround with 11% Special Dividend

Bassett Furniture Industries, Inc. (NASDAQ: BSET) announced that its Board of Directors has declared a special dividend of $1.25 per share of common stock outstanding payable on October 26, 2012, to holders of record on October 12, 2012.  The special dividend is an 11% dividend yield based on current stock prices.

For the past two quarters BSET has paid a quarterly dividend to shareholders of $0.05 per share. And, as previously announced, the company’s Q3 dividend will be paid later this week at the $0.05 per share level.  The regular dividend yield is 1.73%.  Previously this year, on January 3, 2012, shareholders received a special dividend of $0.50 per share.

Bassett Furniture has been on a rebound as its operating profit for the second quarter was $1.6 million versus a $14.3 million loss for the second quarter last year.  Company-owned stores had sales of $42.8 million in the second quarter of 2012 as compared to $38.0 million in the second quarter of 2011, an increase of 12.6%. The increase was comprised of a $2.8 million or 7.9% increase in comparable store sales along with a $2.0 million increase in non-comparable store sales.

Bassett Furniture has a 12-month price target of $15.00.

Altria Group Increases Dividend 7.3%

Altria Group, Inc. (MO) announced that its Board of Directors voted to increase Altria’s regular quarterly dividend by 7.3% to $0.44per common share versus the previous rate of $0.41 per common share. The quarterly dividend is payable on October 10, 2012 to shareholders of record as of September 14, 2012. The ex-dividend date is September 12, 2012.

The new annualized dividend rate is $1.76 per common share, representing a yield of 5.3% based on Altria’s closing stock price.

This dividend increase reflects Altria’s intention to return a large amount of cash to shareholders in the form of dividends and is consistent with Altria’s dividend payout ratio target of approximately 80% of its adjusted diluted earnings per share. Altria has increased its dividend 46 times in the last 43 years.

Recently, Altria has lowered its guidance for FY12, now expecting EPS in the range of $1.96 – $2.00, down from its prior forecast range of$2.29 – $2.33. Analysts polled by Capital IQ are expecting GAAP EPS to be $2.29.

The parent of the Marlboro brands cited one-time charges related to a plan to buy back about$2 billion of its long-term debt, and expects to record a one-time pre-tax charge of $1 billion, or$0.33 per share, in Q3 related to the early extinguishment of debt.

Altria Group has an equity summary score of 8.6 out of 10 for a Bullish outlook.  Zacks Investment has a 12-month target price of $37 for Altria.

HEES Offers a 39% Special Dividend

H&E Equipment Services, Inc. (NASDAQ: HEES) announced that its Board of Directors declared a one-time special cash dividend (the “Dividend”) of $7.00 per share, payable on September 19, 2012 to stockholders of record at the close of business on September 5, 2012. The aggregate amount of the payment to be made in connection with the Dividend will be approximately $246 million. The Dividend will be funded by the proceeds of the Company’s offering of $530 million aggregate principal amount of 7% senior notes due 2022, which closed on August 20, 2012.

At $7 per share, the Dividend represents approximately 39% of the Company’s stock price.  HEES has a market cap of $633 million.

On August 2, H&E Equipment Services reported Q2 earnings of $0.30 per share, versus the Capital IQ consensus of $0.24. Revenues were $209 million, versus the analyst estimate of $206.59 million.  In the same period last year, the company reported EPS of $0.08 on revenues of $184.34 million.

H&E Equipment Services, Inc. operates as an integrated equipment services company. The company rents, sells, and provides parts and service support for hi-lift or aerial work platform equipment, crane, earthmoving equipment, and industrial lift truck categories.

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