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CVR Energy Declares Special Dividend

CVR Energy Inc. (CVI) has declared a special $5.50 per-share dividend and also unveiled plans to initiate a per-share quarterly dividend of 75 cents.  The special dividend is payable Feb. 19 to shareholders of record on Feb. 5.  CVR Energy will begin paying the quarterly dividend of 75 cents a share in the second quarter.

The special dividend will have a 9.57% dividend yield.  The quarterly dividend will have an annualized 5.22%.

CVR Energy Inc. (CVI) has an equity summary score of 9.7 out of 10 for a VERY Bullish outlook.  CVI is projected to produce $6.62 in earnings in 2013.  Based on a PE of 12, the 12-month price target is $79.

CVR Energy noted it expects cash flows of $700 million for 2013 from its interests in CVR Refining LP (CVRR) and CVR Partners LP (UAN) , and based on this its board has declared the quarterly dividend.

CVR Energy owns a majority interest in CVR Partners (UAN), a nitrogen fertilizer master limited partnership. It also recently currently holds a stake of about 84% in CVR Refining (CVRR), a newly formed master limited partnership that will distribute all of its available cash each quarter.

CVR Energy said estimated cash distributions for 2013 from CVR Refining (CVRR) are about $700 million. Under the current ownership structure, the new unit holders of CVR Refining (CVRR) would collectively receive about $115 million, generating an annualized yield of roughly 19% and CVR Energy would receive about $585 million, for the year ending Dec. 31.

Headquartered in Sugar Land, Texas, CVR ENERGY is an independent refiner and marketer of high value transportation fuels and, through a limited partnership, a producer of ammonia and urea ammonia nitrate fertilizers.

CVR Energy’s petroleum business includes full-coking sour crude refinery in Coffeyville, Kan.  In addition, CVR Energy’s supporting businesses include a crude oil gathering system serving central Kansas, northern Oklahoma and southwest Nebraska; storage and terminal facilities for asphalt and refined fuels in Phillipsburg, Kan.; and a rack marketing division supplying product to customers through tanker trucks and at throughput terminals.

This Company Just Raised its Monthly Dividend by 8.4%

Pacific Coast Oil Trust (ROYT) owns net profits interests in the sale of oil and natural gas production.  The Company pays monthly dividends with an annual dividend yield of 9.8%.  Pacific Coast Oil Trust just increased its dividend by 8.4% to $0.151 per month, payable on February 14, 2013, to unitholders of record on February 4, 2013. The Trust’s distribution relates to net profits and overriding royalties generated during December 2012 as provided in the conveyance of net profits and overriding royalty interest.

Pacific Coast Oil Trust (ROYT) is projected to produce earnings of $1.84 in 2013 which is a 28% increase from 2012.

First Call has a consensus BUY recommendation with a 1.8 rating.  Zacks Investment has a 12-month price target of $19.40 on ROYT.

Higher crude oil production and prices favorably impacted this month’s distribution as total production was approximately 8% higher and average realized prices were 2% higher than the prior month.  The current net profits amount from the Developed Properties was approximately $5.8 million, after receipt by PCEC from its counterparties of $0.4 millionrelated to the settlement of applicable hedge contracts. The development expense for the Developed Properties was $0.5 million during the period.

The current distribution also includes a 7.5% overriding royalty on the Remaining Properties which produced 22,783 Boe from 36 Orcutt Diatomite wells and one Orcutt Field well. Production from the Remaining Properties was approximately 10% higher than the prior month due to the Orcutt Diatomite expansion project being ahead of schedule. The cumulative deficit of the net profit interest on the Remaining Properties, including the 7.5% overriding royalty payments, is approximately $5.4 million.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Get Rent Checks from the Government

Government Properties Income Trust (NYSE: GOV) is a real estate investment trust (REIT).  The Company was formed to invest in properties that are leased to government tenants.  The Company owns 29 properties, 25 of which are leased primarily to the United States Government and four of which are leased to the states of California, Maryland, Minnesota and South Carolina, respectively.  The Company is a wholly owned subsidiary of HRPT Properties Trust (HRPT).

As measured by square footage, the IRS is GOV’s biggest tenant.  The next-biggest tenant is U.S. Customs & Immigration. These two make up over 20% of GOV’s rental income. The next biggest in terms of rental income is the Department of Justice.

Government Properties announced that it priced a public offering of 7,500,000 common shares at a price to the public of $23.25 per share. GOV expects to use the net proceeds of this offering to repay amounts outstanding under its revolving credit facility and for general business purposes, including funding potential acquisitions.  Government Properties is currently trading at $22.25 or 4.5% below the share offering price.

Government Properties recently announced it has raised its regular quarterly common share distribution by $0.01 to $0.43per common share ($1.72 per share per year).  Government Properties has a current dividend yield of 7.73%.

Normalized FFO for the six months ended June 30, 2012 were $49.5 million, or $1.05 per share, compared to Normalized FFO for the six months ended June 30, 2011 of $40.5 million, or $1.00 per share.

Net income was $25.0 million, or $0.53 per share, for the six months ended June 30, 2012compared to $21.2 million, or $0.52 per share, for the same period last year.

Since its initial public offering in 2009, GOV has acquired nearly $1 billion of property, at an average cap rate of 8.7%.  Since April 1, 2012, GOV has acquired seven properties for an aggregate purchase price of$125.2 million.

Government Properties has an equity summary score of 8.3 out of 10 for a BULLISH outlook.  It has a 12-month price target of $26.50.

Homeowners Choice is a Strong Buy with Special Dividend

Homeowners Choice, Inc. (HCII) announced that its board of directors has declared a regular quarterly cash dividend on its common shares in the amount of $0.225 per share, which represents a 12.5% increase over the previous quarterly rate of $0.20 per share.  Homeowners Choice has a current dividend yield of 3.74%.

In addition, the board declared a special dividend of $0.10 per common share.  Both the regular quarterly dividend and the special dividend will be paid Dec. 21, 2012 to shareholders of record on the close of business Nov. 16, 2012.

Homeowners Choice, a leading provider of homeowners’ insurance, today announced that it will transfer the listing of its common stock from the NASDAQ Global Select Market to the New York Stock Exchange. The company expects its shares to begin trading on the New York Stock Exchange on Oct. 25, 2012, under the new ticker symbol “HCI.” Until the transfer is complete, the company’s common shares will continue to trade under the ticker symbol “HCII” on the NASDAQ Global Select Market.

Better-than-expected second-quarter earnings, growth in revenues and strong credit quality are the primary rank drivers for this stock.

Homeowners Choice reported its second-quarter results on August 1 with earnings per share of 74 cents, beating the Zacks Consensus Estimate of 60 cents by 23.3% and year-ago earnings of 30 cents by 146.7%. Strong results for the quarter were primarily aided by substantially higher net premiums earned. However, slightly lower net investment income and higher expenses were the downsides.

Net premiums earned increased 112.8% to $36.3 million from $17.0 million in the year-ago quarter.

The Zacks Consensus Estimate for 2012 increased 8.8% to $2.46 per share based on two out of three upward estimate revisions over the last 30 days. The current estimate implies year-over-year growth of 101.4%.

For 2013, two out of three estimates was revised higher over the same time frame, lifting the Zacks Consensus Estimate by 23.1% to $2.45 per share.

Homeowners Choice has an equity summary score of 9.7 out of 10 for a VERY Bullish outlook.

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.

Mortgage REITs are Still an Attractive High Yield Dividend Play

Mortgage REITs have garnered increased attention among investors in recent weeks after the Federal Reserve announced stimulus measures focused on the purchases of mortgage backed securities.  The Market Vectors Mortgage REIT Income ETF (MORT), which seeks to replicate the price and yield performance of the Market Vectors Global Mortgage REITs Index, has gained over 20 percent year-to-date.

Mortgage REITs (mREITs) continue to be that right place for high yield investors.  The mortgage REITs are currently at a 4% premium to estimated third quarter book value and yielding 12.0%.  One of the biggest risks to mREITs is increasing mortgage prepayments as the reinvestment risk is higher when interest rate spreads decline.  The latest data suggests that mortgage prepayment rates showed a slowdown in the level of activity in September.

However, we expect increases in speeds in upcoming months given the rally in rates.  We continue to favor the mortgage REITs with prepay protected portfolios as they will have better third quarter book value performance from increased pay-ups on specified pools and more stable cash flows from lower reinvestment needs.  Prepayment speeds on 30-year conventional speeds decreased 11% in September from the prior month. Trends were generally consistent between the 30-year and 15-year sectors.

The best mortgage REIT plays are IVR, MTGE, and ATMG in the next quarter.

American Capital Mortgage Investment Corp. (MTGE) reported net income for the three months ended June 30, 2012 of $32.2 million, or $1.15 per share, and net book value of $22.08 per share.  The Company has a current price to estimated 3Qbook value of 106% indicating it is trading at a 6% premium.  However, American Capital has a dividend yield of 14.72% that has been increased 165% in the last year.

Coverage on American Capital Mortgage was initiated with an Outperform at JMP Securities. The stock price target is $26.50.

Invesco Mortgage Capital Inc. (IVR) reported net income of $79.8 million, or $0.68 per share (basic and diluted), for the quarter ended June 30, 2012 and its book value per share was $18.40.   The Company has a current price to estimated 3Qbook value of 105% indicating it is trading at a 5% premium.  Invesco Mortgage has a dividend yield of 12.54%.

Morgan Stanley recently upgraded Invesco Mortgage from EQUAL-WEIGHT to OVERWEIGHT.  The stock price target is $22.00.

Apollo Residential Mortgage, Inc. (AMTG) reported Net income was $26.4 million or $1.24 per share, for the three months ended June 30, 2012 and its book value per share was $19.65.   The Company has a current price to estimated 3Qbook value of 104% indicating it is trading at a 4% premium.  Apollo Residential has a dividend yield of 16.02%.

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.

Fisher Communications offers a 27% Special Dividend

Fisher Communications Inc. (NASDAQ: FSCI) initiated a regular quarterly dividend and declared a special $10 cash dividend as the local-media company looks to boost its value to shareholders.

The company said it plans to launch a quarterly dividend of 15 cents, beginning in the fourth quarter. The payout will cost roughly $5.33 million a year.

Fisher intends to fund the special dividend, which will total about $89 million, with existing cash and investments.

Fisher reported earlier this month its second-quarter profit increased 18% as revenue rose 4.8%.

Based on the current stock price, the special dividend will be a 27% dividend yield.  Fisher has a fair value estimate of $45.

Get a Special Dividend of $10.50 (28% Yield)

Kaydon Corporation (KDN) announced that the New York Stock Exchange has established March 27, 2012, as the ex-dividend date for its $10.50 per common share special dividend recently declared by the Board of Directors on February 22, 2012. The dividend of $10.50 per common share is payable on March 26, 2012 to stockholders of record as of the  close of business on March 5, 2012.

Kaydon Corporation is a leading designer and manufacturer of custom engineered, performance-critical products, supplying a broad and diverse group of alternative energy, military, industrial, aerospace, medical and electronic equipment, and aftermarket customers.  KDN is trading at $37.50 with a normal dividend yield of 2.1%.  The Special Dividend of $10.50 is a 28% yield on the current trading price.

Pursuant to the rules of the New York Stock Exchange, for dividends of this size relative to a company’s stock price, the date on which that  company’s shares will begin to trade without the dividend, or ex-dividend, is the first business day following the payable date.  etween the record date and the ex-dividend date the shares trade with a due-bill representing the special dividend.

As a result, shareholders who sell their shares prior to the March 27, 2012, ex-dividend date will also be selling their right to receive the special dividend. Kaydon Corporation common stock will begin trading on an ex-dividend basis beginning March 27, 2012, in accordance with New York Stock Exchange rules.


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