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Companies Likely To Pay Special Dividends

Goldman Sachs has identified 15 companies as likely candidates to declare special dividends before tax hikes go into effect at the start of 2013.

The list includes MasterCard Inc. (MA), Wynn Resorts Ltd. (WYNN), and Stryker Corp. (SYK).

“A well capitalized corporate America, flush with cash, and a potential shift, regardless of party, in the tax rate higher in 2013 augur a wave of special dividend announcements, in our view,” said analysts at Goldman Sachs in a report.

Goldman noted that gross cash among non-financial firms has risen 55% since the end of 2007 and total cash to enterprise value has increased to 9% from 6% during the same period.

The scheduled expiration of tax cuts at the end of the year, part of the so-called fiscal cliff, means that dividends are likely to be taxed as ordinary income in 2013 at a rate of up to 43.4% versus 15% currently, according to the analysts.

“The 2001/2003 tax cuts were originally set to expire at the end of 2010, though, after months of political negotiations, the rates were extended in the final weeks of that year.  Indeed 2010, saw the highest number of one-time dividend announcements, more than double the run-rate of 2000-2011 period,” they said.

In the last 12 years, 75% of companies that declared a special dividend outperformed the S&P 500 in the two days following. “The average outperformance over the two days and the 3 months following the announcement was 330 basis points and 380 basis points, respectively,” said the analysts.

They also noted that historically, announcements for special dividends tend to be concentrated in the fourth quarter.

Companies flush with cash are also increasing their ordinary dividends. In the past week, 8 members of the S&P 500 have raised their dividends. In the S&P 500 as a whole, 403 companies are currently paying dividends, the highest number since November 1999, according to Howard Silverblatt, S&P senior index analyst.

The complete Goldman Sachs special dividends candidate list:

Federated Investors Inc. (FII)

Franklin Resources Inc. (BEN)

General Dynamics Corp. (GD)

Interval Leisure Group Inc. (IILG)

Las Vegas Sands Corp. (LVS)

Mastercard Inc. (MA)

Molex Inc. (MOLX)

Och-Ziff Capital Management Group (OZM)

Patterson Companies Inc. (PDCO)

Pzena Investment Management Inc. (PZN)

Stryker Corp. (SYK)

TransDigm Group Inc. (TDG)

Western Refining Inc. (WNR)

Williams-Sonoma Inc. (WSM)

Wynn Resorts Ltd. (WYNN)

 

Source: MarketWatch.

Stocks with Dividend Yields Above 10%

The following table displays stocks with a high dividend yield of 10% or more.  These stocks are rated bullish or very bullish by their equity summary scores.  The complete list includes PZN, CXS, NYMT, ANH, DX, PMT, ARI, and NCT.  The top 3 yielding stocks are profiled below.

Pzena Investment Management, Inc. (PZN) is a publicly owned investment manager. It provides its services to individuals, typically high net worth individuals, investment companies, charitable organizations, corporations, state or municipal government entities, pension and profit sharing plans, and pooled investment vehicles. The firm launches and manages equity mutual funds and manages balanced mutual fund for its clients. The firm invests in the public equity markets across the globe. The firm employs fundamental analysis while making its investments. Pzena Investment Management, Inc. was founded in 1995 and is based in New York City.  PZN is trading at $4.96 with a dividend yield of 15.3%.   On February 8, 2012 PZN approved a
dividend of 0.19 per share payable on March 2, 2012.

On 02/08/12, the company announced quarterly earnings of 0.08 per share, a positive surprise of 11.1% above the consensus 0.07.  Over the past 4 quarters, the company has reported 3 positive (>2%), 0 negative (<-2%), and 1 in-line (within 2%) surprises.  The average surprise for this time period has been 4.7%.  PZN’s current quarter consensus estimate has increased over the past 90 days from 0.07 to 0.08, a gain of 17.1%.  This improvement is significantly greater than its Industry average of 0.0% during the same time period.  Over the past 90 days, the consensus price target for PZN has increased notably from 4.31 to 5.25, a gain of 21.8%.

CreXus Investment Corp. (CXS) is specialty finance company, which acquires, manages, and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, commercial mortgage-backed securities (CMBS), and other commercial real estate-related assets. It also acquires subordinated commercial mortgage loans and mezzanine loans.  CXS is trading at $10.98 with a 13% yield.

On 02/23/12, the company announced quarterly earnings of 0.55 per share, a positive surprise of 63.2% above the consensus 0.34.  Over the past 4 quarters, the company has reported 3 positive (>2%), 1 negative(<-2%), and 0 in-line (within 2%) surprises.  The average surprise for this time period has been 26.2%.  CXS’s current quarter consensus estimate has remained relatively  unchanged over the past 90 days at 0.31.  Estimates within its Industry have moved an average of 1.0% during the same time period.  During the past four weeks, analysts covering CXS have made 2 upward and 0 downward EPS estimate revisions for the current quarter.

New York Mortgage Trust, Inc., (NYMT) operates as a real estate investment trust (REIT) in the United States. The company engages in acquiring, investing, financing, and managing mortgage-related assets.  While New York Mortgage Trust Inc.’s earnings have increased from $0.11 to an estimated $0.35 over the past 5 quarters, they have shown acceleration in quarterly growth rates when adjusted for the volatility of earnings. This indicates an improvement in future earnings growth may occur.  NYMT is trading at $7.02 with a 14% yield.  NYMT has an outperform rating from Zacks Investment Research.

NYMT’s current quarter consensus estimate has decreased over the past 90 days from 0.34 to 0.33, a loss of -5.0%.  Consensus estimates for the Specialty Financials Industry have moved an average 1.0% during the same time period.  During the past four weeks, analysts covering NYMT have made no upward or downward EPS estimate revisions for the current quarter.

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