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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.

Pfizer offers a Total Yield Stock Play with an Increasing Dividend Payout

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.

Pfizer (PFE) has a projected share buyback yield of 14% and a current dividend yield of 3.49%.  This provides investor a potential for a total yield of 18.2%.  The stock has a 12 month price target of $33.

Investors were pleased to hear that the company intends to increase its dividend payout ratio to 40% (from 33%) by the end of 2013. The company returned about $15 billion to shareholders in the form of dividends and share buybacks in 2012. Pfizer intends to use the proceeds from the sale of the Nutrition business on additional share repurchases and other value creating opportunities.

On 7/30/2013, the Board of Directors authorized a new$10 billion share repurchase program to be utilized over time. This new program is in addition to the$3.1 billion of authorization currently remaining under the previous share repurchase program.

Pfizer posted second quarter 2013 earnings of $0.56 per share, 5% below the year-ago earnings. Revenues, which fell 7% to $12.9 billion, missed the Consensus Estimate of $13.1 billion. Revenue growth was impacted by the loss of exclusivity of certain products and purchasing patterns for Prevnar/Prevenar in some markets.  Pfizer maintained its outlook for 2013. Revenues will be hit by genericization and the expiration of a few co-promotion agreements. The company s pipeline needs to deliver given the Lipitor loss of exclusivity and the upcoming loss of exclusivity on additional products in the next few years.

We expect revenues in 2013 to decline about 12%, primarily reflecting the classification of the animal health business (divested in June 2013) as a discontinued operation. We also project lower sales of established drugs, largely due to ongoing generic erosion in off-patent Lipitor, Detrol and Xalatan, as well as the expiration of certain co-promotion agreements.  However, we project continued gains in Lyrica muscle pain therapy and Celebrex arthritis treatment. We also forecast good growth from emerging markets, new oncology agents such as Xalkori and Inlyta, and from the recent launches of Xeljanz and Eliquis.

In July 2013, PFE announced plans to internally separate into three distinct business segments, two innovative units and one value business.  The first innovative unit will comprise drugs with patent exclusivities beyond 2015. The second innovative segment will include vaccines, oncology agents, and consumer healthcare.  The third value unit will consist of mature drugs, and joint venture products. We believe the new structure should provide investors greater transparency of PFE’s different businesses, and represents a prelude for a potential eventual split-up of Pfizer into three separate firms.

Look at Pentair as a Total Yield Stock Play

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.

Pentair (PNR) has a projected share buyback yield of 22% and a current dividend yield of 1.47%.  This provides investor a potential for a total yield of 23.47%.  The stock has a 12 month price target of $70.

Pentair Ltd. recently announced that it will pay a regular quarterly cash dividend of $0.25 per share on November 8, 2013 to shareholders of record at the close of business on October 25, 2013. Pentair had previously announced on April 29, 2013 the approval by its shareholders of an ordinary cash dividend of $1.00 per share to be paid out of Pentair’s capital contribution reserve in four equal quarterly installments of $0.25 in each of the third and fourth quarters of 2013 and the first and second quarters of 2014. Pentair has increased its dividend for 37 consecutive years.

Pentair paid dividends totaling $0.88 per share in 2012. Pentair paid dividends of $0.23 per share in each of the first and second quarters of 2013 and $0.25 per share in the third quarter of 2013.

Pentair (PNR) is a global diversified industrial company, which makes and markets water and flow control devices and electrical and electronic enclosures, recently doubled in size after merging with Tyco’s flow control unit.

We project close to 3% organic sales growth in 2013, driven by the water & fluid solutions segment and, to a lesser extent, valves & controls, while technical solutions remains soft. We see favorable trends continuing in global energy (oil & gas and mining), food & beverage and North American residential, with more modest growth in emerging regions. PNR should benefit globally from its expanded distribution via its merger with the Tyco Flow Control unit. We still see headwinds in Western Europe.

We expect gross margins to expand by at least 0.5% in 2013 to above 33%, on supply chain and repositioning cost savings, and a more favorable mix, while commodity input costs remain generally stable. We see adjusted EBITDA margins widening by more than 160 basis points to near 16.5% in 2013, reflecting volume leverage and improved productivity, and $105 million in cost synergies.

Best Income Stocks for 2013 – Domtar Corporation (UFS)

Domtar Corporation (NYSE: UFS) engages in the design, manufacture, marketing, and distribution of fiber-based products in North America.  The forestry industry is coming through a painful period marked by low-cost competition from emerging markets and the collapse of the U.S. housing industry.  However, the industry is rebounding as more companies are back on the growth track. One income stock to watch is Domtar Corporation (NYSE: UFS) as it offers a great total return in 2013.

Domtar 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.

Paper miller Domtar Corp. (UFS) is high on the total yield list with 15.6% due to a potential 13.5% earnings accretion from share buybacks and 2.1% from dividends.  Upside on the mid-$80 stock is roughly 3%.

Domtar has an equity summary score of 8.1 out of 10 for a Bullish outlook.  First Call Analyst consensus have a BUY recommendation with a 2.1 rating.

Under its stock repurchase program, Domtar repurchased, during the 3rd quarter, 578,328 shares of common stock at an average price of $75.42 per share.  Since the inception of the program, Domtar repurchased 8,135,157 shares of common stock at an average price of $80.53. At the end of the quarter, Domtar had$345 million remaining under this program.

Domtar has a current dividend yield of 2.16%.  The dividend was increased 28.6% in the past year with the most recent increase in Q2 2012.

Domtar Corporation  reported net earnings of $66 million ($1.84 per share) for the third quarter of 2012 compared to net earnings of $59 million ($1.61 per share) for the second quarter of 2012 and net earnings of $117 million ($2.95 per share) for the third quarter of 2011. Sales for the third quarter of 2012 amounted to $1.4 billion.

Excluding extraordinary items, the Company had earnings before items1 of $67 million ($1.87 per share) for the third quarter of 2012 compared to earnings before items1 of $59 million ($1.61 per share) for the second quarter of 2012 and earnings before items1 of $123 million ($3.10 per share) for the third quarter of 2011.

When compared to the second quarter of 2012, paper shipments increased 0.9% and pulp shipments increased 12.8%.

Domtar is projected to increase EPS by 12.8% to $7.38 in 2013 and 19% to $8.84 in 2014.  With a PE of 12, the 2013 price target is $88.56.

We believe Domtar’s focus will continue to be on improving its cost structure, rationalizing its assets to match supply with demand, maximizing its free cash flow generation, and seeking acquisitions that reduce earnings volatility.  Domtar has made solid progress on debt reduction, and we expect it to use its strong cash flows to accelerate share repurchases.

Company Profile:

Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®.  Domtar is a leading marketer and producer of a complete line of incontinence care products marketed primarily under the Attends® brand name.  Domtar owns and operates Ariva®, an extensive network of strategically located paper and printing supplies distribution facilities.

Best Income Stocks for 2013 – Assurant, Inc. (AIZ)

Assurant, Inc. (NYSE: AIZ), a premier provider of specialty insurance and insurance-related products and services, announces that its board of directors has declared a quarterly dividend of $.21 per share of common stock.  The dividend will be payable on March 11, 2013 to stockholders of record as of the close of business on Feb. 25, 2013.

Assurant 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.

Assurant is projected to increase EPS by 11.6% in 2013, from $5.00 to $5.58.  Trading in the mid-$35 range, it has the highest potential earnings accretion due to share buybacks at 13.8% and a dividend yield of 2.6%, putting its total at 16.4%, according to Goldman.  AIZ has a 5-year average dividend growth rate of 11.8%.  Assurant has an equity summary score of 7.6 out of 10 for a Bullish Outlook.

Target price now is at $45, an increase of 25% from current levels.

AIZ pursues a differentiated strategy of building positions in specialized market segments for insurance products and related services in North America and selected international markets. The markets AIZ targets are generally complex, have a relatively limited number of competitors, and, according to the company, offer attractive profit opportunities. In these markets, AIZ’s strategy is to leverage the experience of its management team and apply its expertise in risk management, underwriting and business-to-business management, as well as its technological capabilities in complex administration and systems.

Assurant Specialty Property recently announced it expects losses from Superstorm Sandy to be in the range of $200 million – $220 million on a pre-tax basis and net of reinsurance.  Based on this estimate, the Company does not expect to exceed the retention limit of its 2012 property catastrophe reinsurance program.

A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the property/casualty and life/health insurance subsidiaries of Assurant, Inc.   Additionally, A.M. Best has affirmed the ICR of “bbb” and debt ratings of Assurant . The outlook for all ratings is stable.

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