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Drive this Stock to 40% Gains while Increasing Dividends Each Quarter

Income investors should look at this stock for a growing dividend, increasing earnings per share and a 40% potential upside in stock price.  The Company has increased dividends for 11 straight quarters, increased EPS 21% in latest quarter and trades at a current price to sales ratio of 0.27.

Penske Automotive Group (NYSE: PAG), an international transportation services company, announced the highest third quarter and nine months income from continuing operations and related earnings per share in company history.   For the third quarter 2013, income from continuing operations attributable to common shareholders increased 21.0% to $66.0 million and related earnings per share increased 21.7% to $0.73 per share when compared to adjusted figures for the same period last year of $0.14 per share.

The big auto retailer logged a 12% jump in 3Q same-store sales, outpacing larger rival AutoNation (AN), and service-and-parts margins also rose strongly.  But average profit/car sold was essentially flat from a year ago for both new and used vehicles. Nonetheless, Sterne Agee says, “PAG’s luxury and import portfolio, concentration in the UK market (34% of revenue) and the company’s ability to improve cost accounted for the better-than-expected financial performance. We expect the positive trends to continue in 2014.”

On October 23, 2013 Penske increased its dividend by 6.3%.  Commenting on the dividend, Penske Automotive Group

President Robert H. Kurnick, Jr., said, “Our Board of Directors is pleased to offer our shareholders a 6.3% increase in the quarterly dividend to $0.17, demonstrating the continued confidence we have in the strength of the auto retail marketplace and in our ability to continue growing our business.”

Penske has increased dividend s for 11 straight quarters as the dividend paid in Q2 2011 was $0.07 per share.  Today (Q4 2013), the Company is paying $0.17 per share for this quarter.  This is an increase of 143% over a little more than 2 years.  Penske has a 5-year average annual dividend growth rate of 13%. The Company has a current dividend yield of 1.5%.

Penske is projected to have earnings of $2.73 per share in calendar year 2013.  The Company is projected to grow earnings by 15% to $3.15 in 2014.  Carmike is projected to increase EPS by another 10% to $3.45 in 2015.

The stock has an equity summary score of 7.9 out of 10 for a BULLISH outlook.  Thomson Reuters consensus has a buy rating of 2.3 on the stock.  Penske Auto Group (NYSE: PAG) has a 12-month price target of $63.00 which is an increase of 40% from the current trading level.

Penske Automotive Group, Inc., headquartered in Bloomfield Hills, Michigan, is an international transportation services company, operating retail automotive dealerships, Hertz car rental franchises and commercial vehicle distribution. The company currently operates principally in the United States, Western Europe, Australia and New Zealand, employs approximately 17,000 people worldwide and is a member of the Fortune 500 and Russell 2000.

Ameriprise offers a Total Yield Stock Play with a Growing Dividend

While income investors constantly seek out stocks with growing dividend yields, they can also benefit from share buybacks.  The share buybacks present an opportunity for investors to get capital gains in addition to current income.  Currently, 80% of S&P 500 companies are buying back shares. Combine this with dividend yield and you can get a total yield of greater than 10% in 2014.  We are presenting a series of stocks worth a look.

Ameriprise Financial (NYSE: AMP) has a projected share buyback yield of 14% and a current dividend yield of 1.95%.  This provides investor a potential for a total yield of 15.95%.  The stock has an equity summary score of 7.9 out of 10 for a BULLISH outlook.  The stock has a 12 month price target of $104.

Ameriprise has a one-year dividend growth of 48%.  The dividend has grown from $0.35 in Q3 2012 to the current $0.52 in Q3 2013.  The 5-year average annual dividend growth rate is 25%.  AMP has a current dividend payout ratio of 36%.

Second-quarter 2013 net operating revenues were up 9%, year to year, on a 14% increase in management and advice fees and a 4% decline in net investment income.  Assets under management and administration of $703 billion were up 7% from a year earlier, helped by market appreciation.  We expect at least modest single digit annual revenue growth in 2013 and 2014, on a sustained pickup in asset inflows.  We think the Annuities segment will continue to be under pressure from the low interest rate environment in the near term, and that Annuities and Protection segment revenues will be relatively stable over the next two years, holding back the company’s overall revenue growth rate.

Balancing fund underperformance and outflows, particularly in International equities, slower-than-expected margin improvement, and AMP’s commitment to return capital to shareholders, we believe the shares are appropriately valued. We have a positive view of AMP’s focus on the growing market of affluent households.  We believe AMP is well positioned for long-term growth due to its shift toward the less capital-intensive and higher growth potential businesses of retirement planning advice and asset management, as well as a more international focus. Also, further economies of scale should be realized as integration of Columbia Management was nearly completed in 2012.

Look for a Tasty Profit from this High Quality Dividend Grower

Investors looking for an A-rated quality company with a growing 3% dividend yield should look at the soup favorite – Campbell Soup Company.  The company just increased its dividend 7.6% but still has room for growth.  Campbell’s is rated a 5-star stock by S&P indicating a strong buy recommendation.  The stock has a 12-month price target of $48, an increase of 15% from its current price.

Campbell Soup Company (CPB) recently announced that the company’s Board of Directors has approved an increase in its quarterly dividend from $0.29 per share to $0.312 per share, an increase of approximately 7.6%.  The quarterly dividend is payable Oct. 28, 2013 to shareholders of record at the close of business Oct. 8, 2013.

“This dividend increase is another step forward as we execute our plans to drive shareholder value by delivering sustainable, profitable net sales growth,” said Denise Morrison, Campbell’s President and Chief Executive Officer. “We are encouraged by the progress we’ve made and are confident in our long-term growth prospects as we strengthen our core business and expand into higher-growth spaces.”

The company has paid dividends since it became public in 1954. The last quarterly dividend increase was to $0.29 per share from $0.275 per share on Nov. 1, 2010.

We look for Campbell’s to focus on new products, expanding its presence in packaged fresh foods, and growing sales in some international markets.  We expect at least near-term challenges in U.S. beverage, North American foodservice, and the Australian businesses.

The company has long term targets for annual sales growth of 3% to 4% and 5% to 7% annual growth in earnings per share. Over time, we expect that growth to be helped by new or enhanced products. Areas of new product focus, in our view, will include expansion of the Goldfish snack brand, development of the dinner sauce category, and introduction of a Homestyle soup line. We see the Bolthouse business aiming to have more of a presence in the snack food area with a ShakeDowns carrot product that includes seasonings.

Investors should look to add Campbell’s to their Monthly Income Plan for both current income and future growth.

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.

MRO – Look for a 49% Price Gain

David Kostin, Goldman Sachs’ chief U.S. equity strategist, provides us with a list of stocks with the most upside potential in his new Monthly Chartbook.   Kostin notes early May was solid for the S&P 500, but cited month-end drags in telecom services and utilities (-7 and -9 percent, respectively).  Nevertheless, he projects the S&P will end up 7.3% by year end, at 1750.

One stock on the Goldman list to watch is Marathon Oil (MRO).  The stock is up 39% in the past year but Goldman Sachs is projecting an increase of 49% in the stock.  In addition, Marathon offers a 1.96% dividend yield.

Production grew 8% (excluding Libya; 48 thousand barrels of oil equivalent per day; MBOE/d) in 2012, to 388 MBOE/d. MRO expects development at U.S. onshore plays to drive a 7%-10% production boost in 2013 (ex Libya and Alaska), to 405-425 MBOE/d, and a 5%-7% production CAGR (compound annual growth rate) through 2017. MRO believes these assets are 80% liquids. We expect a lower planned 2013 rig count, made possible by drilling efficiencies, to keep cost inflation down. Since the fourth quarter 2012, Eagle Ford and Bakken production are up 22% and 6%, respectively. MRO is ending shale activity in Poland on weak tests.

MRO spun off its downstream business to shareholders in a tax-free transaction in mid-2011. We had been looking for reduced refining contributions over the next five years and believe greater exposure to upstream projects in new international and U.S. onshore basins will drive upstream growth at lower operating costs. MRO’s streamlined asset base (75% oil, based on reserves) is one of the higher-content liquids portfolios among domestic E&P companies. Operations in Libya resumed in late 2011 and MRO is looking to ramp up production there. MRO lowered its onshore U.S. rigs to about 25 as of October 2012, versus 34 rigs earlier in 2012, in response to lower prices.

MRO’s growth assets are where it expects to make significant investment in order to realize oil and gas production and reserve increases. It is focused on U.S. growth by developing liquids-rich shale play positions, a strong position in the core of the Eagle Ford shale. In addition, growth assets include the development of Angola Block 31, discoveries in Iraqi Kurdistan, select Gulf of Mexico blocks and Canadian in-situ assets. Exploration is focused on Poland, Iraqi Kurdistan, Norway and the Gulf of Mexico. MRO had a goal of divesting between $1.5 billion and $3.0 billion of non-core assets between 2011 and 2013. For the two-year period ended December 31, 2012 , it had entered into agreements for approximately $1.3 billion in divestitures, of which $785 million were completed. The remaining $545 million in asset sales were completed by February 22, 2013

We see 2013 and 2014 EPS of $2.76 and $3.35, respectively, versus $2.45 (adjusted) in 2012.

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.

This Monthly Dividend Stock May be Worth a Look

Fifth Street Finance Corp.(FSC) may be an ideal name for aggressive income investors. This is one of the top business development companies. The consensus price target is $11.50. Investors receive a 10.47% dividend with monthly distributions.  First Call consensus has a buy recommendation with a 2.5 rating.

Fifth Street reported net investment income of $0.27 (excluding gains on convert repurchase, diluted), in line with prior quarter and our estimate. This was a result of lower interest income earned on a larger average portfolio. Book value increased by $0.02 following a net $2.5 million unrealized appreciation on investments.

Liquidity: As of this week, FSC increased its available liquidity to $738 million following the post quarter end note issuance, capital raise, and credit facility expansion. FSC is well positioned for the acquisition of Healthcare Financial Group as management works toward its target leverage.

Valuation: Fifth Street is trading 12% premium, 1% above the peer group average, and yielding 10.47%, above the peer group average of 9.1%.

Estimates: Analyst lowered the 2013 estimate to $1.08 (from $1.10) to reflect a larger liquidity drag than previously expected. The 2014 and 2015 estimates remain unchanged at $1.15 and $1.20.

Maintain Buy: FSC is well positioned from a liquidity and capital standpoint to continue to take advantage of a strong pipeline of growth. The next step for the stock is to translate that into higher ROEs by achieving and maintaining higher levels of leverage.

In May, FSC announced that it has entered into an agreement to purchase a specialty lender, Healthcare Finance Group, that provides lending to healthcare companies. FSC will be investing $100 million, financed by cash and liquidity mentioned above.

OnMay 6, 2013, upon expiration of our existing stock repurchase program, the Board of Directors authorized a stock repurchase program to acquire up to$50 millionof outstanding common stock. Stock repurchases under this program would be made through the open market at times and in such amounts as management deems appropriate, provided they are below the most recently published net asset value per share.

Targa Resources Can Produce 10% Distribution Growth in 2013

Targa Resource Partners (NGLS) is a buy recommendation for income investors.  The MLP has a current dividend yield of 5.98%.  NGLS has a 5-year average annual dividend growth rate of 10%.  NGLS is a strong buy recommendation with a 12-month target price of $51.

Targa Resource Partners announced that the board of directors of its general partner has declared a quarterly cash distribution of $0.6975 per common unit, or $2.79 per common unit on an annualized basis, for the first quarter 2013.  The approved distribution represents an increase of approximately 3% over the previous quarter’s distribution and 12% over the distribution for the first quarter 2012. This cash distribution will be paid May 15, 2013 on all outstanding common units to holders of record as of the close of business on April 29, 2013.

First quarter 2013 net income attributable to Targa Resources Partners

was $38.9 million compared to $70.1 million for the first quarter of 2012. Net income per diluted limited partner unit was $0.16 in the first quarter of 2013 compared to $0.63 for the first quarter of 2012. The Partnership reported earnings before interest, income taxes, depreciation and amortization and other non-cash items (“Adjusted EBITDA”) of $132.2 million for the first quarter of 2013 compared to $145.4 million for the first quarter of 2012.

NGLS is a quality mid-cap natural gas processing and fractionation MLP that has an impressive array of fee-based expansion projects set to come into service over the next 18-24 months that should help to offset an over-supplied, and consequently, soft NGL pricing environment for the next three years. The key question regarding investing in NGLS is how the fee-based operating margin from the expansions will offset the drag from likely NGL over-supply. We believe that NGLS’ recent emphasis on fee-based operations will allow it to continue providing its unitholders distribution growth well above the sector average. Given the increasing percentage of fee-based projects, NGLS’s mix should improve to near 55% by the end of 2013 and 65% by the end of 2014. NGLS reiterated its guidance of 10%-12% distribution growth for 2013 and is comfortable having 0.9x coverage for the first half of the year which improves as the year goes on and as expansion projects are completed. Management is guiding to an average of ~1.0x for FY2013. We are modeling high single digit distribution growth for the next several years.

We are holding our three-year distribution growth forecast of 9% CAGR. NGLS’s 4Q results give us confidence that the growing fee-based portion of its business (Logistics, Marketing, Badlands) could support distribution growth despite a challenged NGL pricing environment for the next few years.

We are making minor changes to our outlook with DCF/unit adding $0.03 to $2.97 in FY2013 on lower assumed equity issuance, though EBITDA drops $23mm to $623mm after the 1Q miss and re-setting our commodity price deck. NGLS reiterated its $595mm-$655mm EBITDA guidance for 2013 and 1.0x distribution coverage for 2013 overall.

Microsoft May be Worth a Look Here

Windows 8 has gotten bad reviews, its mobile push has stalled and it’s facing a murky market for corporate software.  But despite all those headaches, Microsoft Corp.(MSFT) has seen its stock rising.  The software giant’s shares have jumped 14% over the past three months.  The stock has a current dividend yield of 2.82% and is a regular 15% per year dividend increase stock.  The Company will unveil the new X-box next month.  The worst may be behind this software giant.

Microsoft reported Q3 results of $20.489 billion in revenue and EPS of $0.72, compared to consensus of $20.497 billion in revenue and EPS of $0.68.

Microsoft reported March quarter EPS and operating margin ahead of consensus expectations with increased expense controls, while revenue was essentially in line with consensus expectations—with Windows, Microsoft Business Division, and Server & Tools sales falling slightly below estimates and the Online Services and Entertainment & Devices divisions exceeding forecasts. Although the PC market continues to put pressure on Windows and Office revenue and server shipments have been slow, Microsoft effectively managed expenses during the quarter and reported improving growth in OSD and Windows Phone.

Going forward, although PC shipments are expected to remain weak in the June quarter, we expect the combination of more attractive price points, the ramp of new chipsets from Intel, and greater adoption by OEMs of touch screens for ultrabooks and laptops to drive greater adoption of Windows 8 devices in the second half of 2013 and into 2014 than the market appreciates (particularly in the business user segment with the eventual release of Surface Pro 2). Furthermore, we expect the end-of-life of Windows XP in April 2014 to drive growth in the professional PC segment.

Based on these dynamics, we believe that the rate of decline in PC shipments is bottoming, and with continued better-than-expected cost controls, improving OSD and Windows Phone revenue, a new Xbox cycle on the horizon, and solid long-term competitive positioning and near-term product launches in MBD and S&T, we expect Microsoft’s recent outperformance to continue.

Our fiscal 2013 estimates are adjusted to revenue of $78.812 billion and EPS of $2.68 from revenue of $81.514 billion and EPS of $2.78.

We maintain our Outperform rating and our target price of $38. At a 9.7x NTM P/E multiple, Microsoft trades at a 33.8% discount to the S&P 500.

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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