Wednesday - March 9, 2005
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1. FEATURED EXPERTS
Here we cast the spotlight on a timely Featured Expert commentary that recently appeared on Zacks.com. Following the article you will find previews of other profitable commentaries with insights and recommendations from leading investment experts.
Citigroup (NYSE: C) has a dividend yield of 3.7%. Not bad, especially for a company that appears capable of double-digit profit growth and significant capital gains. But what if you had purchased Citigroup 10 years ago?
During that period, Citigroupís dividend increased at an annualized rate of 36%. Citigroup is expected to pay a dividend of $1.76 per share over the next year, so an investor who purchased a share of Citigroup for a split adjusted $5.40 at the end of 1994 is now earning a yield of 32.6% on his or her initial investment. Thatís 32.6% for the year excluding any capital gains.
Therein lies the power of dividend growth. Investors who buy stocks with steadily increasing dividends will see their income rise over time regardless of how the stock performs; any capital gains are gravy. High yields have appeal for current income, but the highest-yielding stocks rarely offer solid dividend-growth potential. Stocks with a modest yield and solid growth can, over time, deliver very high yields
From 1926 until 2003, large-company stocks generated annualized total returns of 10.4%. The income return, or the amount provided by dividends, was 4.3% a year. In the last decade, however, dividends have provided a smaller share of the marketís returns
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In the roaring bull market of the late 1990s, corporate America began to de-emphasize dividends. In 1997, the Dow Jones Industrial Averageís annual yield fell below 2% for the first time in at least 77 years. By the end of 1999, the S&P 500 Indexís dividend yield had fallen below 1.2%. But the future seems to favor dividends. In 2004, the average dividend-paying stock in the S&P 500 returned 18.4% versus 13.4% for the average nonpayerósubstantial outperformance even without the income return.
More favorable tax treatment of dividends and rising criticism of cash hoards have spurred many companies to increase or initiate dividends. In the first six weeks of 2005, 74 companies in the S&P 500 Index increased their dividends, versus 52 in the same period in 2004 and 41 in 2003.
Standard & Poorís estimates that 34% of the S&P 500 is held by individual investors, and that the reduction in dividend taxes has already saved those investors $30 billion.
A combination of three years of poor stock returns, high-profit dividend hikes and initiations, and the new tax benefits have raised the profile of the dividend. Many investors have come to understand that dividends are more than just an income tool, but a crucial piece of the total return picture.
So how do we find dividend growers? Start with companies that can grow sales and profits, because dividends are paid out of those profits. Companies with rising profits often have the wherewithal to raise their payout. Then consider companies with modest payout ratios. The payout ratio is the percentage of earnings paid out as dividends. Companies with high payout ratios are already sharing most of their profits with shareholders and may lack the flexibility to increase dividends in the future, particularly if profit growth is weak.
Lastly, consider dividend histories. Unlike sales and profit growth, which are dependent on the operational success of the business, dividend growth is an act of will on the part of management. Once a company develops a reputation for increasing its dividend regularly, it may become loathe to stop.
Bank of America (NYSE: BAC)is one of the world's leading financial services companies. Bank of America provides individuals, small businesses and commercial, corporate and institutional clients across the United States and around the world new and better ways to manage their financial lives. The company enables customers to do their banking and investing whenever, wherever and however they choose.
Johnson & Johnson (NYSE: JNJ) is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional.
Sysco Corporation (NYSE: SYY) is the largest North American distributor of food and food related products to the foodservice or food-prepared-away-from-home industry. The company provides its products and services to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers.
Get clear Buy, Hold and, yes, SELL advice from one of the nationís oldest and most successful investment newsletters. Our in-depth analysis and advice have been helping subscribers weather market volatility since 1946. Learn more about this newsletter and free trial offer at: http://at.zacks.com/?id=157.
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Dennis Slothower doesnít see any signs that the economy will
start to zoom. Discover what that means for interest rates and
find out which sectors and stocks could do well in this
David Friedís Buyback Premium Portfolio continues to outperform
the S&P 500. This expert can show you how to benefit from a
buyback strategy, and highlights a recent recommendation that
could outperform the market this month. More...
Can the market suffer from depression? Jack Schannep did some
research and found that the market can be afflicted by Seasonal
Affected Disorder (S.A.D.). Discover why the January pullback
to the level reached on the 24th may have marked the low for
the year. More...
ATP Oil and Gas is a company that has a lot of potential for
the future. Jim Collins takes an in-depth look at this NASDAQ
growth stock. More...
Februaryís employment data led to a positive breakout in the
major indices, but the NASDAQ wasnít invited to the party. Get
Gregory Spearís take on this situation, along with some
information on a pair of stocks to watch. More...
Featured Expert articles are courtesy of the 60+ leading investment newsletters that have partnered with us to create the Zacks Expert Advice service. Check out the Experts section of Zacks.com daily to find profitable stock picks and timely market commentary at: http://at.zacks.com/?id=1386.
2. WEEKLY COMMENTARY: Screen of the Week
Zacks.com offers 3 unique weekly commentaries that all further
our mission to help you Profit from the Pros. Today is the
latest installment of Screen of the Week from Kevin Matras.
Each week Kevin shares with you another winning screen he has
discovered using the Research Wizard software from Zacks
Investment Research. Learn more about the Research Wizard at: http://at.zacks.com/?id=1388.
"2 New Screening Ideas to Find Winning Stocks, NOW!!!"
Today I want to focus on 2 screening ideas that I use regularly, to help me find winning stock picks. Theyíre great screens to help me see whatís hot and whatís not.
What Iím looking for is; stocks with 50% or greater EPS growth for the last 2 quarter over quarter periods (Q0 over Q-1 and Q-1 over Q-2), positive EPS surprises for the last 2 quarters, positive EPS Estimate Revisions over the last 4 weeks and that are trading within 20% of their 52 week highs.
This is a great screen to find stocks on the move with earnings momentum backing it up.
The parameters I use are:
% Change Actual EPS Q(0)/Q(-1) >= 50%
Iím also applying it to stocks trading at >= $5 with a minimum of at least 50,000 shares traded daily.
Hereís a few on that list now (as of Mon. 3/7/05);
I have found that stocks that meet this criteria have a tendency to keep on moving in that same direction.
The parameters for this are easy.
Current Price > Price 1 Day Ago
And itís applied to stocks that are trading within 20% of their 52 week high. Additionally, theyíre >= $5 and have a minimum of at least 50,000 shares traded daily.
I love this one. Largely because, instead of focusing on just the biggest gainers (which often are one day events -Ė that have been missed), this spots price momentum AND accumulation. Very bullish signs.
Hereís a few of the stocks it picked for Mon., 3/7/05;
Get the rest of the stocks on this list and start using this winning strategy in your own portfolio. Sign up now for your free trial to the Research Wizard and start making better decisions today.
All the Screen of the Week strategies are created and back-tested using the Research Wizard software from Zacks Investment Research. Learn more about the Research Wizard and Free Trial offer at: http://at.zacks.com/?id=1388.
Discover all the Free Screening Tools on Zacks.com at: http://at.zacks.com/?id=1389.
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ALL STAR TOP PICKS
The brokerage industry looks poised for a solid first quarter,
and the All Stars have four recommendations from this space to
help you manage a more profitable portfolio. More...
EARNINGS & SECTOR UPDATE
The current consensus for first quarter earnings growth is +10.5%, which Nick Raich says is too low. Read his analysis, and discover the industries out in front. More...
3. BEST OF ZACKS INDEPENDENT RESEARCH
The analysts from Zacks Independent Research create a mountain of insightful equity research everyday of the week. Here you will find the best of that information recently published on Zacks.com.
BULL OF THE DAY
Radware (RDWR) - Improving Revenues and Market Share
Lear Corporation (LEA) - First Quarter Guidance Lowered
Property-Casualty Wary of Rising Interest Rates
Telecom Equipment Vendors Expect to Grow Margins
4. TRADING STRATEGIES: Model Portfolios
Zacks.com is proud to share with you some of the best trading strategies that truly allow you to Profit from the Pros. Today we feature our 2 exclusive model portfolios on Zacks.com (All Star Analyst and Brokerage Buy List). See below for highlighted stocks currently in these profitable portfolios.
This exclusive portfolio contains only those stocks recommended by 5 or more of the best stock pickers on Wall Street based upon performance (aka All Star Analysts). Here are 2 stocks currently appearing in the All Star Analyst Portfolio.
Michaels Stores, Inc. (NYSE: MIK) Earlier this month, Michaels Stores announced that total sales and same-store sales for the month of January improved +12% and +7% respectively. The company went on to say that fiscal 2004 will be its eighth straight year of record sales and operating income. Michaels said this was due in large part to its continued efforts to enhance its merchandising capabilities through improvements to its systems and processes, as well as investments in its merchandising and inventory management organizations. Michaels Stores is the leader in its niche and has caught the attention of the All Stars, who were pleased that the company boosted its fourth quarter and full year earnings per share outlook. To continue your research on MIK, click here.
United Technologies Corporationís (NYSE: UTX) Board of Directors recently approved a +26% quarterly dividend increase to 44 cents per share, payable March 10, 2005 to shareowners of record at the close of business on February 18th. The company said the Boardís action affirms its confidence in sustained earnings growth and cash flow performance. Investors like that United Technologiesí strong cash flow has allowed the company to increase the dividend +80% since 2002, and the All Stars were pleased with its fourth quarter. Earnings per share and consolidated revenues improved upon year-ago totals, and the company confirmed expectations of earnings per share growth between +10% and +15% for 2005. To continue your research on UTX, click here.
Which brokerage analysts are the best stock pickers in their field and what stocks do they recommend today? Find out here with the Zacks All Star Analyst Survey, the best way to find those rare few analysts whose recommendations are worth following. http://at.zacks.com/?id=1419
Long-term investors take note. The stocks in the portfolio must be on the core recommended list of at least three of the top 14 brokerage firms. These stocks tend to be large-cap, "blue chip" companies and is for conservative, long-term investors.
The Allstate Corporation (NYSE: ALL): An unusually high level of catastrophe losses didnít keep Allstate down in 2004. Earlier this month, the company released its fourth quarter results, demonstrating that it finished 2004 and began 2005 on a high note. Property-Liability premiums written improved +4.8% year-over-year, or +5.6% adjusted for reinsurance and accruals for premium refunds, helped by an increase in policies in force (PIF). Furthermore, growth in PIF for Allstate brand standard auto and homeowners lines remained strong at +5.5% and +6.4% respectively. Total Allstate brand PIF advanced +3.9%. Results like these, along with recommendations from three of the top brokerage firms, shows that this company is one of the leaders of its industry. To continue your research on ALL, click here.
General Electric (NYSE: GE) announced late last month that GE Commercial Finance, its business-to-business financial services unit, completed its $4.6 billion acquisition of CitiCapitalís Transportation Financial Services Group (CTFSG). CTFSG provides secured loans, and operating and finance leases for about 196,000 heavy and medium duty commercial trucks and trailers through a variety of customer channels. The acquisition allows GE Commercial Financial to build out an area that is already a core competency of its business while adding substantial new customer relationships in the sector, according to the company. Six of the largest brokerage firms have GE on their focus list for reasons like this acquisition, but also because of a solid fourth quarter and an impressive record of success. To continue your research on GE, click here.
5. ZACKS TOOLBOX
Zacks.com is first and foremost a free resource to help you make more profitable stock picks. In this space each week, we will provide insights into various tools and data points provided on Zacks.com, and how to use them to improve your portfolio's performance.
Virtually every investment web site's mission statement can be boiled down to the following; "We will help you be a more successful investor".
Sounds great. But how is that accomplished? Today we want to go beyond the catch phrases to show how Zacks.com is designed to help you maximize your returns year after year.
Zacks Investment Research was formed in 1978 to compile, analyze, and distribute brokerage research to investors. The guiding principle behind our work is the belief that there must be a good reason why the brokerage firms spend over a billion dollars a year to research stocks to recommend to their clients. Obviously these investment experts must know something special that is indicative about the future direction of stock prices. We were bound and determined to unlock that secret knowledge and make it available to our clients to improve their investment results.
We went about compiling all research created by the over 250 brokerage firms in North America. With this wealth of information at our disposal the team at Zacks set out to find patterns in the brokerage research data that would serve as an accurate indicator of the future direction of a stock. What we discovered is that..."Earnings per share (EPS) estimate revisions are the most powerful force impacting stock prices."
From this seminal work was born the Zacks Rank, which is a quantitative model that uses 4 factors related to earnings estimates to classify stocks into five groups; with 1 being the highest and 5 being the lowest. Since 1988 the Zacks #1 Ranked stocks have generated an average annual return of 32.9% vs. 11.8% for the S&P 500 (calculated through 9/30/04). Learn more about the Zacks Rank at: http://at.zacks.com/?id=1705 Or see the current list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=1551.
The Zacks Rank proved to be a great starting point for our work to uncover strategies to beat the market. Over the years we also discovered that changes in brokerage recommendations were indicative of future stock performance. This information is readily available on the web site. We also started to calculate the stock picking performance of individual brokerage analysts. So, it doesn't matter how many times an analyst appears on CNBC, we simply want to tell you who is good at picking stocks. We call this our All Star Analyst survey located on the site at: http://at.zacks.com/?id=1706.
Our latest endeavor to help investors be more successful is Profit Tracks. Each Profit Track is a successful stock screening strategy with proven results through the Bear Market of 2001-2002 and the Bull run started in 2003. We currently have 6 unique screens that were hand picked to offer investors great strategies to potentially outperform the market in the years ahead. To see the 6 strategies with full details and stock picks then go to: http://at.zacks.com/?id=1707.
We hope you agree that we have gone beyond the rhetoric of most investment web sites and truly delivered tools that can help you become a more successful investor. And perhaps best of all, each tool we discussed above is available for free on Zacks.com. We look forward to helping you Profit from the Pros in the months and years to come.
OTHER TOOLS FROM ZACKS
At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Ranked (Strong Buys) have produced the following results for investors:
And just as importantly, our #5 Ranked stocks (Strong Sells) have alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
To truly take advantage of the Zacks Rank, you need to first understand how it works. That`s why we created the free special report; Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions. Download a free copy now to prosper in the years to come at: http://at.zacks.com/?id=75.
Or view the full list of Zacks #1 Ranked stocks at: http://at.zacks.com/?id=72.
FREE PORTFOLIO TRACKER
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We hope you enjoyed this issue of "Profit from the Pros", And we look forward to visiting with you again next week.
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*The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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