Read Also: 5 Most Undervalued DJIA Stocks

Analysts according to Thomson Reuters have a consensus price target objective of $88.79 over the next year versus a current share price of $74.90. That gives an implied upside of about 18.5% and its 2.6% dividend yield is likely to be raised sometime around this coming summer if all goes well.

One key issue is that much is price-based because United Tech is also down from its 52-week high the most of the three DJIA conglomerates with a drop of more than 18% from its 52-week high.  The market cap of $68 billion keeps United from being in the mega-cap or super-cap group and not that much higher than the $58 billion worth of 3M and only one-third of GE’s market cap.

There is a wild card here, a very big wild card… The Goodrich Corporation (NYSE: GR) acquisition which has been a huge overhang. That is the trick, and a clean deal will allow it to soar but a troubled deal could act as as a continued thorn in its side.

Read Also: DJIA Stocks Could Rise 12% (or 15%) In 2012

With a 52-week trading range of $66.87 to $91.83, United Tech does not even to reach a 52-week high to reach the consensus analyst price target.

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JON C. OGG

Now we have a Stern Agee report after the dividend was raised to $0.17 from $0.15 per quarter.  Stern Agee’s Ben Elias noted that the dividend hike was expected and is now looking for what else lies ahead.  First and foremost, the annual meeting outlook for 2012 is taking place this week (Dec. 13) and may be another catalyst.

The report notes, “After the GE Capital investor meeting there is a higher level of confidence that GE Capital has the financial strength, liquidity and reserves to pay the dividend to the parent, but little faith in the regulator’s ability to be able to familiarize themselves with GE Capital’s operations and approve the dividend payment before Year-End 2012.”

The firm noted that a higher dividend contribution could come from greater confidence in the industrial businesses, higher profitability, lower delinquencies and adequate provisions for losses as well as secured funding at GE Capital for 2012.

If the historic reversion comes and the dividend trends to 2.5% to 3.0% (Currently more than 3.5%) then there could be significant upside to the current share price.

Stern Agee’s rating is “BUY” and its price target objective is $22.75; Thomson Reuters still has a price target of only about $20.98 on the stock.  At $16.40 after more than a 2% drop today, GE’s consensus price target implies upside of about 28% (plus that near-4% new dividend yield).  If Stern Agee’s call is correct then there is more than 40% upside if you combine the yield and the price target.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio you can sign up in the email submission below.  Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events, and many other aspects governing your finances.

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GE raised its quarterly payout by $0.02 to $0.17 per quarter as the company tries to move back towards its old payout rate.  This dividend will not come until 2012 and is payable on January 25, 2012 to shareholders of record as of December 27, 2011.  The stock’s ex-dividend date is December 22, 2011.

Again, this is even sooner than we expected and it was not expected by many in the market.  GE shares were already yielding 3.7% as is.  Now the stock is up 2.9% at $16.78 and the new dividend yield will be just over 4% now.

Jeff Immelt noted that GE has redeemed the Berkshire Hathaway Inc. (NYSE: BRK-A) preferred shares and is redeploying its NBC Universal capital into other growth areas.  It was just this week that the company’s GE Capital forecast that its metrics have continued to improve and that it would start paying a dividend back to the parent company as soon as it was cleared to do so.  Be advised that this is the fourth dividend hike in two years since GE had to cut its payout to more easily get through the recession.

Immelt also noted, “We believe that the GE business model will continue to deliver strong earnings and cash flow growth going forward.” 

As far as what this translates to based upon the Thomson Reuters consensus estimate of $1.56 EPS for 2012, the dividend payout ratio is about 43.5% of expected earnings per share.  As far as the 2011 consensus of $1.37 EPS, the payout ratio is far higher at nearly 50%.

If you want to receive the full 24/7 Wall St. 2012 Model Dividend Portfolio you can sign up in the email submission below.  Each morning we send our free email list subscribers a snapshot of the key feature stories, the top daily analyst upgrades and downgrades, previews for key events, and many other aspects governing your finances.

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Bernstein raised General Electric Co. to ‘Outperform’ from a less optimistic ‘Market Perform’ rating.  The old price target was $19.00, still indicating about 16% upside as of yesterdays close.  The new target has been raised to $21.00 per share.  This puts the new upside of about 28.5%.

If you include General Electric’s 3.7% dividend, the new call implies more than 30% upside.  For a comparison, the consensus price target objective before adjusting for this upgrade was $20.93 for General Electric.

The research note is in agreement with us over one thing for sure: a higher dividend for 2012.  Their call is that the dividend could rise to 4% in 2012 after a review from the Fed. Part of the reason is obvious in stronger core metrics, but Bernstein also cited free cash flow and a likely stronger earnings power in key businesses.

GE’s value has been hard to argue against as far as “Value Stocks” are concerned at under 12-times earnings and under 11-times next year’s earnings.  Shares are up 2.3% at $16.71 on normal trading volume today.

JON C. OGG

The report cited a recent gain of 36% in earnings, with higher operating income across all the business segments except in the finance and financial products operations. The sectors which were noted as performing well were Insurance, Railroad, Utilities and Energy, Manufacturing, Service and Retail.

The growth engine was labeled as the property and casualty insurance businesses with a contribution of approximately 40% of its 2010 operating income.  Another favorable note for the segment was that it maintains capital strength at exceptionally high levels.

So, what is worth?  Apparently it is worth $91.00 per share and Zacks has an “Outperform” rating on Mr. Buffett’s company.  What is interesting is that this $91.00 figure is a 6-month target rather than a one-year price target.  What does this translate to for valuation? The projection is roughly 13.2-times Zacks’ earnings estimate for 2011 and it implies a total return of about 17% in that period.

We would note that there may be one issue with this report, and that is that Warren Buffett himself has always said to watch the firm’s stated book value per share.  The reason behind that is that he admitted that Team Buffett & Munger could effectively make earnings almost anything they wanted to in any single quarter because of its ability to lock-in gains or losses from its vast investment portfolio or by incurring or pushing out charges on assets. Merger expenses could also alter those quarterly figures.

Mr. Buffett made some significant changes to his investment holdings this last quarter, and here were his full equity holdings.

Shares closed Thursday at $77.81 and the 52-week range is $65.35 to $87.65, so if Zacks is right then Berkshire Hathaway is heading for a new year high.

JON C. OGG

If you add up the past 12 SPDR Dow Jones Industrial Average (NYSE: DIA) dividend payments, the DJIA yield has been almost 2.5% over the last year. The good news is that the yield is already higher if you include the hikes that are likely to be announced. The price of the DJIA today should offer what will be closer to a 3% dividend yield in 2012.

The list of the 30 DJIA components is very long, but we have reviewed each and all of the following: Alcoa (NYSE: AA), American Express (NYSE: AXP), AT&T (NYSE: T), Bank of America (NYSE: BAC), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Chevron (NYSE: CVX), Cisco Systems (NASDAQ: CSCO), Coca-Cola (NYSE: KO), DuPont (NYSE: DD), Exxon Mobil (NYSE: XOM), General Electric (NYSE: GE), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), International Business Machines (NYSE: IBM), Intel (NASDAQ: INTC), Johnson & Johnson (NYSE: JNJ), JPMorgan Chase (NYSE: JPM), Kraft Foods (NYSE: KFT), McDonald’s (NYSE: MCD), 3M (NYSE: MMM), Merck & Company (NYSE: MRK), Microsoft (NASDAQ: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), Travelers Companies (NYSE: TRV), United Technologies (NYSE: UTX), Verizon Communications (NYSE: VZ), Walmart Stores (NYSE: WMT) and finally Walt Disney (NYSE: DIS).

We have broken out each DJIA component to review the history and expected dividend action individually. While this is a no short read, dividend and income investors better pay close attention here. Value investors should pay attention as well. It is these DJIA components that are often considered as the prize of the sector and many peers are facing the same trends today and tomorrow. Our review focuses on when the last hikes have been seen, when the next dividend hike will come, and what the price and implied upside to the Thomson Reuters consensus price target offers. We also even have shown an expected income payout ratio on each if applicable to further show which companies can boost their payouts ahead.

Alcoa is still hanging its hat on the notion that the aluminum market will double by 2020, so we have to at some point expect the DJIA component to boost its dividends again in the years ahead. Still, the company is trying to accumulate more liquidity and the current climate is a choppy one for metals players. The dividend has been stuck at $0.03 since the first of 2009 and it was $0.17 per quarter before then. Any hikes might only be nominal until the business climate becomes a bit more steady and predictable. The 1.1% is very unimpressive for a DJIA component and we have no great dividend ambitions in the near-term for Alcoa, even if only 10% to 15% of expected 2012 income is slated for payouts. At $10.35, the consensus price target of about $13.25 is well under the 52-week high of $18.47.

American Express has had its dividend steady at $0.18 per quarter since its January 2008 payment and the current yield is only 1.4%. The company’s credit metrics keep improving and its payout is not quite 19% of expected earnings next year. Still, this is a financial stock and it is hard to a financial stock to boost dividends right now. It has no branch bank operations but the climate remains tenuous. At $49.70, the consensus price target is around $55.75 if you trust price targets on financial firms.

AT&T has had four quarters in a row of $0.43 and it has a history of raising its dividend each year. The question that hangs over it is the regulatory block over the T-Mobile buyout and the huge penalty that AT&T will ultimately have to pay out of it cannot clear regulatory hurdles. This is one of the dividend stars with a 5.8% yield but it also pays out more than 70% of its expected income. Another hike is possible, but our take is that the dividend yields are now so high that telecom giants will only ratchet them up slightly. At $29.20, the consensus price target is $31.90.

Some positions which we expect ro would just assume are in Bank of America Corporation (NYSE: BAC), Dollar General Corporation (NYSE: DG), Exxon Mobil Corporation (NYSE: XOM), ConocoPhillips (NYSE: COP), Mastercard Inc. (NYSE: MA), Verisk Analytics, Inc. (NASDAQ: VRSK), Wal-Mart Stores Inc. (NYSE: WMT), and Wells Fargo & Co. (NYSE: WFC).  Just keep in mind that Berkshire Hathaway is granted “Confidential Treatment” in some positions, so it is possible that many others are present but not known by the public.

The total invested was $23.9 billion in the quarter and that appears to be more than any quarter of the last decade and then some.  Almost $7 billion of that was classified as equities.  Keep in mind that the $5 billion for BofA and the $9 billion or so for Lubrizol were a part of the total figures.

Bank of America Corporation (NYSE: BAC) was not in the prior holdings one quarter ago, but what we do know is that Buffett came to the rescue with a $5 billion preferred share purchase where Buffett also gets all of those warrants.  Technically this will not appear in the mid-November filing that shows Buffett’s September 30, 2011 holdings.  It doesn’t matter.  This is now one of his larger positions.

Dollar General Corporation (NYSE: DG) was listed as a new of 1,497,800 shares a quarter ago and our take is that Buffett (actually Todd Combs) will have bought more shares in a recent secondary offering.  There is a reason this was one of our own Top Stocks To Own for the Next Decade.

Exxon Mobil Corporation (NYSE: XOM) is one we continue wonder why Team Buffett lightened up on.  The team already pledged long ago to wind out if ConocoPhillips (NYSE: COP) and that really never happened.  Berkshire’s latest Exxon position was 421,800 shares, which saw the same as before but lower than the 1.276 million shares originally.  Buffett cannot easily just put a few billion to work in most companies, but he easily could accomplish that in Exxon.

Mastercard Inc. (NYSE: MA) was a recent position and it was almost doubled in the last quarter to some 405,000 shares.  With how well this performed and with its toll-keeper business model we would just assume that Team Buffett still likes it and maybe likes it even more.

Verisk Analytics, Inc. (NASDAQ: VRSK) was another new position and it seemed an odd fit for Team Buffett.  That is likely because it was Todd Combs making the call.  The position was 2,101,125 shares worth “only” about $72.7 million as of June 30.  If they liked it before, maybe they liked it again.

Wal-Mart Stores Inc. (NYSE: WMT) is another retailer that we belive Team Buffett may have warmed to for dividends and for valuation.  This position was raised in 2010 but has held steady at just over 39 million shares.  If you see that Wal-Mart is barely 1% off of its 52-week high, it sure seems as though some investors might be betting that the old man in Omaha decided that good things were happening in Bentonville, Arkansas.

Wells Fargo & Co. (NYSE: WFC) has long been Warren Buffett’s favorite bank and he has gradually been adding shares more and more through time.  This position was just over 368.6 million shares and it has grown each quarter of late.  If Team Buffett was adding big positions, it seems that they might have kept their finger on the “buy button” here even when you consider the BofA $5 billion preferred share and warrant investment.

Berkshire Hathaway’s most current portfolio of equity holdings is available here.

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JON C. OGG

Is the world suddenly fixed? No. Are there still problems? Very much so. Will unemployment and housing suddenly recover? No. Still, the current barometer is showing that a recession is not yet likely going to come to the United States.  We have broken down ten key factors that signal how we may have luckily avoided the next recession: GDP, stocks, corporate earnings and dividends, interest rates, commodities and inflation, consumer spending, China and India, Europe, economist predictions, and the election cycle.

GDP, Gross Domestic Product

The U.S. Gross Domestic Product was far from any great or massive growth.  Regardless of what anyone says about GDP, this is the true barometer for whether or not we are in or entering into a recession.  For the third quarter, that preliminary reading was +2.5% and even the price component via the PCE Price Index was +2.4%.  Celebrating 2.5% growth might be a bit like taking a teenager to celebrate a birthday with any gift they want, in the dollar store.  Still, this is not anywhere close to a recession.  It is up from the readings of +1.3% GDP in the second quarter and versus +0.4% in the first quarter.  The caveat: anything under 3% GDP growth will not really lend to a great recovery and it is certainly not going to act to help housing prices nor the constantly weak jobs market.

Stocks

October of 2011 is turning out to be a phenomenal month.  This may be the best in a generation.  Not only did the DJIA get back above 12,000 after the E.U. stabilization and Greek debt haircut but this is up from the low of just under 10,400 for better than a 16% gain from the low.  This also happened during earnings season and we have witnessed the CBOE Volatility Index (The fear index) drop from a peak of above 45 down to almost 25, showing that the fear is drying up.  And the best news is that Apple Inc. (NASDAQ: AAPL) was only up about 5% so the market itself broadly outperformed Wall Street’s favorite darling.  You cannot have an infrastructure recovery without Caterpillar Inc. (NYSE: CAT) and its stock has risen a whopping 37% from the first day of October.  The two DJIA banks of J.P. Morgan Chase & Co. (NYSE: JPM) and Bank of America Corporation (NYSE: BAC) are both up just over 30% each from the first day of October.  Even a bear market bounce would not be this big if a recession was imminent.  The caveat: even a remedial chartist and a cocktail napkin chartist can recognize that stocks over the last three weeks have moved from very oversold to extremely overbought.

3M reported $1.55 EPS and $7.53 billion in sales, but we had estimates of $1.61 EPS and $7.77 billion in sales.  Because of Europe and because of customers growing weary, organic volume growth being soft, and because of weak electronics sales, 3M guided 2011 to $5.85 to $5.95 EPS from a prior range of $6.10 to $6.25 EPS.  3M’s shares are down 4.2% at $78.88, its 52-week range is $68.63 to $98.19, and the consensus price target before this morning’s news was $103.29.

General Electric Co. (NYSE: GE) has listed lower since Friday’s earnings report.  At $16.21 after a 1.5% drop today, the 52-week range is $14.02 to $21.65 and the consensus analyst price target is $20.79.

Honeywell International Inc. (NYSE: HON) went up on earnings and is up even today.  The gain is only 0.1% at $51.82, but its 52-week range is $41.22 to $62.28 and the consensus price target is $58.67.

United Technologies Corp. (NYSE: UTX) has risen from last week and the 0.8% drop to $76.06 today compares to a 52-week range of $66.87 to $91.83 and to a consensus price target of $89.65.

3M would have an implied 28% expected gain to the consensus price target had its news not eliminated that today.  We will soon see what the implied upside is, but the negative news flow is not going to do it well.  Implied upside for peers is as follows: GE at over 28%, Honeywell over 13% and United Tech at almost 18%.

3M may prove to be a drag on conglomerates and on the market, but it looks as though General Electric still offers the most implied upside.

JON C. OGG

Shares are trading around $16.75, its 52-week trading range is $14.02 to $21.65 and analysts have a consensus price target that has slid further to $20.93.  Keep in mind that GE shares have recovered more than $2.50 per shares as recently as the lows of October 4.

General Electric has also noted that it is paying back Berkshire Hathaway Inc. (NYSE: BRK-A) from Warren Buffett’s late-2008 investment in the 10% preferred shares.  While we have already seen some conglomerates report their earnings, we would expect that GE’s report will set the tone much more firmly for how 3M Co. (NYSE: MMM) and United Technologies Corporation (NYSE: UTX) trade in the week ahead.
 
The chart is a bit of a conundrum here if you look at the stockcharts.com chart below.  Since GE recovered so much it became a bit overbought on a near-term basis this week.  Simultaneously, the stock also cleared a very obvious triple-top after bouncing off the lows.  If the company manages to show strong reports there is really nothing but dead space between today’s price and somewhere around $17.90 to $18.00.

The 50-day moving average is $15.69 and the 200-day moving average is $18.36.

Options traders appear to be pricing in only a move of up to $0.35 or so in either direction.  That is only just about 2%, but we would note that options expiration date is tomorrow as well.

We would note that Jeff Immelt has said in recent months that he is happier with the GE portfolio than he has ever been.  We’ll have to see if he stocks by that in the conference call.  Another expectation we expect to hear clarification or direction on is just how much business is suffering in Europe after so many companies have said that business in Europe is suffering.  Also, look for Jeff Immelt’s comments on the overall business environment in China.

Another conglomerate’s earnings are due as well on Friday morning.  Honeywell International Inc. (NYSE: HON) will report and Thomson Reuters has estimates of $1.00 EPS and $9.26 billion in revenues; next quarter estimates are $1.08 EPS and $9.64 billion in revenue. 

JON C. OGG