The first bit of news is that the $1.18 EPS report was a penny ahead of expectations, but other reports were calling the earnings a miss.  The larger news is of the company’s break-up whereby it will spin off its drug unit.  Zacks has outlined its take on the break-up as well with a current “Neutral” rating. 

There are at least two partnerships which hang in the balance, although this should not change the relationships in any meaningful way on the surface.  Abbott has a partnership with Biogen Idec Inc. (NASDAQ: BIIB) for daclizumab (in phase III) to treat relapsing-remitting multiple sclerosis.  The candidate of elotuzumab, under development with Bristol-Myers Squibb Co. (NYSE: BMY) is in Phase III studies for multiple myeloma. We would not consider any of these partnerships as being at-risk.
 
After the split, Abbott will become two separate public companies: one will be focused on diversified medical products and one will focus on R&D-based pharmaceuticals.

Diversified medical products: will have an estimated $22 billion in sales and it will retain the Abbott Labs-branded generic pharmaceutical, nutrition, diagnostics, and devices operations.

R&D-based pharma: NewCo is yet to be named and sales are estimated at roughly $18 billion.  This is Abbott’s current portfolio of proprietary pharma and biologics.  Products are CReaon, Kaletra, Humira, Lupron, Synagis, and Synthroid.

The tax-free spin-off will be distributed to existing Abbott Laboratories shareholders and is slated to be completed by the end of 2012 as it wants to continue to ensure its growth strategy.

Abbott saw its shares peak in the $58 to $60 range in 2007 to 2008 and things have not yet recovered the former peak.  Still, shares did hit a 52-week high of $55.61 on Wednesday morning and the stock is currently up 4.5% at $54.83 and shares have already traded double the normal volume in less than an hour of trading.

The current consensus analyst price target one-year out from Thomson Reuters is only $58.00.  This break-up aims to go above and beyond that.

JON C. OGG

One company will be the ADT North America residential security business with annualized revenue of approximately $3 billion and approximately 16,000 employees. Naren Gursahaney, the current president of Tyco’s security solutions segment, will become the new company’s chief executive officer.

The second will be a provider of flow control products and services with annualized revenue of approximately $4 billion and approximately 15,000 employees. Patrick Decker, the current president of Tyco’s flow control segment, will become the new company’s chief executive officer.

The third company will be commercial fire and security business with annualized revenue of approximately $10 billion and approximately 69,000 employees. George Oliver, the current president of Tyco’s fire protection segment, will become the company’s chief executive officer.

What is interesting is that this move comes at a time right after rumors that United Technologies Corporation (NYSE: UTX) is out raising a large financing.  Reports over the weekend noted that the $68 billion United Tech is examining a bid for Goodrich Corporation (NYSE: GR) with a market cap of $11.6 billion.  Other companies were on the rise last week as potential buyout candidates as well.

Calls have been made for General Electric Co. (NYSE: GE) to also deconglomerize itself.  The company has made divesting moves like the NBC Universal (still partial sale) and others, although in recent months Jeff Immelt has said that he is happier with GE’s business portfolio than he has ever been.  If Immelt did not decide to break up GE shortly after the recession, he is unlikely to make such a move during better times or during less-bad times unless the benefit is overwhelmingly more.

Some conglomerates get larger while some shrink.  Former CEO Dennis Kozlowski put Tyco together by acquisition after acquisition.  His empire was taken away from him when he was ousted and sent to prison.  What remains of his former empire is now being broken up yet again.

JON C. OGG

The filing does not include the number of shares to be offered, the offering price, or the timing of the IPO, but AIG is expected to sell about 20% of ILFC initially with more than 80% of the company’s stock expected to be floated within three years of the IPO. The proposed IPO could place the company’s value at $8-$10 billion.

AIG has tried to sell all or part of ILFC following its takeover by the federal government, but no buyer was found. The company’s fleet numbers more than 900 planes and it has orders for an additional 236 for delivery by 2019.

AIG has said that proceeds from the IPO will be used to repay more of the remaining $65 billion it owes the US government.

The Wall Street Journal noted an interesting wrinkle in today’s filing.  Bank of America Corp. (NYSE: BAC) and Merrill Lynch are not included among the underwriters. The filing names Citigroup Inc. (NYSE: C), JP Morgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS) as underwriters. BofA Merrill Lynch had been thought to be among the original proposed underwriters, but it has been replace by Morgan Stanley.

Could the US Treasury Department have scotched BofA’s participation? That’s possible, given the bank’s recent struggles and government demands that BofA develop a contingency plan in case its condition gets worse. One possibility is that the bank would sell off Merrill Lynch, its most profitable business. Not very enticing to AIG’s federal masters.

AIG’s shares are down more than -2.5% in the first hour of trading this morning, at $24.14, in a 52-week range of $21.46-$62.87. BofA shares are down more than -6.25%, at $7.41, in a 52-week range of $6.01-$15.31.

Paul Ausick

No money was injured while filming

If you have been a reader of 24/7 Wall St. for long, you know that we appreciate companies that pay dividends just about as much the investors who buy companies because of their great dividends.  With all of the uncertainty in today’s markets and in today’s economy, having a solid dividend policy may be the key to keeping nervous investors from fleeing and going into cash or other assets that actually pay no income at all.  Some of the greatest companies of today and yesteryear actually refuse to pay dividends to shareholders.  For some companies, they can get away without paying a cent to owners because the value and growth is so strong.  There is another list of “Dividend Sinners” which should be paying a dividend to holders and have just decided to control that cash in-house instead.

We have identified more than twenty Dividend Sinners. Our review focuses on Amazon.com, Inc. (NASDAQ: AMZN), Amgen Inc. (NASDAQ: AMGN), Apple Inc. (NASDAQ: AAPL), Bed Bath & Beyond, Inc. (NASDAQ: BBBY), Berkshire Hathaway Inc. (NYSE: BRK-A), Cincinnati Bell Inc. (NYSE: CBB), Dell Inc. (NASDAQ: DELL), Dollar General Corporation (NYSE: DG ), Dollar Tree, Inc. (NASDAQ: DLTR), eBay Inc. (NASDAQ: EBAY), Electronic Arts Inc. (NASDAQ: ERTS), EMC Corporation (NYSE: EMC), Express Scripts, Inc. (NASDAQ: ESRX), Flextronics International Ltd. (NASDAQ: FLEX), Google Inc. (NASDAQ: GOOG), Jack In The Box Inc. (NASDAQ: JACK), Nasdaq OMX Group Inc. (NASDAQ: NDAQ), Symantec Corporation (NASDAQ: SYMC), United Continental Holdings, Inc. (NYSE: UAL), Urban Outfitters, Inc. (NASDAQ: URBN), Western Digital Corporation (NYSE: WDC), Yahoo! Inc. (NASDAQ: YHOO), and Zebra Technologies Corporation (NASDAQ: ZBRA).

You can see that many of these are not technology giants.  Many are.  The aim is to handicap which companies still can get away without paying out income to their shareholders versus those which can and should.  Some of the more obvious Dividend Sinners are the same as you have seen criticized before, but many of these are overlooked by the media and by investors alike.  In some cases the lack of dividend payments is just ludicrous.  Cisco Systems, Inc. (NASDAQ: CSCO) waited far too long to adopt a dividend policy and look what happened to its shares after inaction.  Kohl’s Corporation (NYSE: KSS) took until this year before finally declaring a dividend while its direct competitors have paid dividends for years.

Again, some companies can get away without paying holders a penny.  Our aim was to identify the highly able companies and those which lag peers enough that the dividend trend just needs to be considered by management of these companies. We looked at forward P/E ratios based upon next year’s estimates from Thomson Reuters, the return on equity (ROE) from Finviz.com, the current share price and a 52-week trading range, along with the market cap of each company.  If applicable, we handicapped competitor and peer dividends and even noted how high of a dividend these companies could pay out.

Activist investors could have a field-day with at least a few of these dividend sinners…

Amazon.com, Inc. (NASDAQ: AMZN) is the online retail king.  It has a forward price earnings multiple of 56 and a return on equity (ROE) of 16.3%.  Its market cap is $100 billion. The recent share price was $222 and the 52-week trading range is $114.51 to $227.20.  While much of the tone of this article might seem to be geared around a negative impact of a no-dividend policy, Amazon.com is actually in a different camp.  At 58-times 2012 projected earnings, the question to ask is “how high of a dividend could it pay anyway?”… Wall Street has even been able to absorb habitually lower and lower margins as it ramps up its capital spending.  With shares having now hit the $100 billion market cap and having hit fresh all-time highs, is there are reason to criticize the company right now?  We predicted that it would be on of the next mega-cap stocks for a reason.

Amgen Inc. (NASDAQ: AMGN) is due with earnings shortly and its path has been a boring one for long enough.  The largest independent biotech outfit has a forward price earnings multiple of 9.7 and a return on equity (ROE) of 19.4%.  Its market cap is $51 billion.  The recent share price was $54.00 and the 52-week trading range is $50.26 to $61.53.  Investors hope and pray that Amgen will be the first of the big biotechs to finally declare a dividend.  The call has been a longstanding call and the company has more than enough ample cash and patent protection to justify a healthy payout.  With about $15 billion in liquidity and $10 billion in long-term debt, investors should ask the company to stop wasting the cash by repurchasing shares in the open market.  It hasn’t worked as is the case with most share buyback plans.  If it is not going to have a dividend, maybe it should consider growing into new arenas with a substantial acquisition.  Our take is that Amgen is going to have to do something at some point soon and a dividend will do far better than a stock buyback plan.

No money was injured while filming

The mania of stock splits is not quite as fast and furious as it was earlier in June on the split calendar, but we are still seeing some key splits on the docket which are set to take effect. The splits featured are only in the true splits rather than including the myriad of companies forced to enter into reverse stock splits in order to maintain listing requirements.  These are all challenging all-time highs or multi-year highs as you would expect.

During the month of July, we still have stock splits coming from the following:

• Lululemon Athletica Inc. (NASDAQ: LULU);
• ONEOK Partners, L.P. (NYSE: OKS);
• Triumph Group, Inc. (NYSE: TGI);
• Sun Hydraulics Corp. (NASDAQ: SNHY);
• and Clean Harbors, Inc. (NYSE: CLH).

Lululemon Athletica Inc. (NASDAQ: LULU) is one phenomenal stock and is fastly becoming a yoga-monopoly along with being a sports apparel winner.  It is also one that we expected the split to take effect in June before it updated its calendar at the end of last month.  This will also mark the first split for Little-Lulu.  We now have an ex-date of July 12 to reflect its 2-for-1 stock split.  Shares just hit a new all-time high yet again of $123.50 on Thursday.  Here is some food for thought: LULU has risen so much since it announced its split that the company should have considered announcing a 3-for-1 split rather than just a 2-for-1 split.

ONEOK Partners, L.P. (NYSE: OKS) is also set to go ex-split next week.  This 2-for-1 split, rare considering it is a limited partnership, will have an ex-date of July 13.  This was announced on June 7.  Shares just hit another all-time high of $87.00 on Thursday.  This one carries a market-premium as far as what is an implied dividend yield (capital distribution) compared to common stocks.  Its general partner is a wholly owned subsidiary of ONEOK, Inc. (NYSE: OKE) and it owns 42.8% of the overall partnership interest.  As a reminder, that is pronounced as “One-Oak” rather than “On-ee-okk” as many call it.

Triumph Group, Inc. (NYSE: TGI) is the aircraft components player rather than the maker of old unreliable cars and it certainly isn’t an old rock group.  Its 2-for-1 split is set to reflect the early June announced split with an ex-date of July 15.

Sun Hydraulics Corp. (NASDAQ: SNHY) is thinly traded enough and now high-priced enough for a stock of its sort that many investors may have forgotten all about it.  Those who stuck with this hydraulic systems player are glad they stayed.  With shares close to $50.00, this one has been a screaming stock in the last year and in the year before that.  This recently hit all-time highs.  Its ex-date to reflect its 3-for-2 split is July 18.

Clean Harbors, Inc. (NYSE: CLH) is a $100+ environmental remediation player and it has also performed well with shares hitting an all-time high of $110.30 just this Thursday.  This appears to be the company’s first stock split ever and that 2-for-1 split will have an ex-date late in the month on July 27.

Stock splits usually occur when company shares are at all-time highs or at least at multi-year highs.  What is interesting is that many companies today are refusing to embrace the old stock split game.  There are literally about 15 or 20 high-profile splits that could come down the pipe in the future if those companies decide to loosen up on having that mystique of a higher share price.

JON C. OGG

No money was injured while filming

We have noticed a near-record wave of stock splits of late despite the trend of today where companies have tended to prefer high share prices over record share prices.  We also have several key splits coming up this week that investors will need to pay attention to.  These are from Six Flags Entertainment Corp. (NYSE: SIX), America Movil S.A.B. de C.V. (NYSE: AMX), Lululemon Athletica Inc. (NASDAQ: LULU), and MAXIMUS, Inc. (NYSE: MMS) are all executing their splits this week.

Basic price data and an impact has been listed if applicable.

Six Flags Entertainment Corp. (NYSE: SIX) declared its 2-for-1 stock split back on May 5 and the ex-date is June 28.  Shares were trading at $73.74 on the split date and they closed at an adjusted basis of $72.82 on Monday.

America Movil S.A.B. de C.V. (NYSE: AMX) is not one we routinely follow.  It has already declared a 2-for-1 stock and Yahoo! Finance lists June 30 as the payable date, with July 1 as the ex-date as the data that the share price reflects the adjusted price.

Lululemon Athletica Inc. (NASDAQ: LULU) announced the yoga split of 2-for-1 back on June 9, and its payable date is June 30 with an ex-date of July 1.  That means that it will reflect the split this coming Friday. Shares were at $86.14 before the split was announced, but now shares are up at $108.58 and an all-time high of $108.99 was hit Monday.

MAXIMUS, Inc. (NYSE: MMS) declared a 2-for-1 stock split back on May 9, and it has a payable date of June 30 with an ex-date that will reflect the adjusted share price of July 1.  Shares were at an adjusted $79.46 before it announced the split and $83.26 after its split, but now shares are at $80.71.

As a reminder, stock splits change nothing fundamentally under the shares.

JON C. OGG

When it comes to initiating dividends, this is an area that suddenly combines trends for growth investors and value investors alike.  It also brings up activist investing, corporate governance, accounting, and tax issues that had not previously been there.

There are lessons to be learned from Apple’s history and from Apple’s technology rivals and peers.  24/7 Wall St. has evaluated the top ten reasons that Apple will not pay a dividend any time in the near future.

1.  First and foremost… The company is consistent in saying it has no plans for a payout.   The point is made clear in Its 2010 annual report in a section titled “Dividends”… “The Company did not declare or pay cash dividends in either 2010 or 2009. The Company anticipates that for the foreseeable future it will retain any earnings for use in the operation of its business.” We could argue for just how long “the foreseeable future” is, but the company has said the same thing for years.

2.  Dividend history does not matter…. Apple actually used to pay a dividend long ago.  It was in the early 1990s and then it stopped when the world was being consumed by PC buyers buying Windows for the first time ever.  Back then, Apple was just a niche company with a different shareholder base and a different customer base.

3.  Two maturing moves at once might not appear to be the best ‘growth’ move…  Apple is reportedly planning a new corporate spaceship-like headquarters.  The costs of the move and even of building the facility will not eat up anywhere close to all of Apple’s liquidity.  Building a mega-office campus with a unique design that houses thousands of workers on more than 100 acres could be argued as the peak of growth even if Steve Jobs said Apple is “growing like a weed.”  Perhaps writing a big check to shareholders AND building a massive campus for workers might send the wrong symbol to the investor community.

4.  Direct rival history…  Microsoft Corporation (NASDAQ: MSFT) is a prime example that Apple wants to avoid.  Microsoft has paid both special dividends and had regular dividends.  This has failed to generate any extra buzz around Microsoft stock.  The attitude taken when Bill Gates returned a huge slug of cash to shareholders via a special dividend was that Microsoft’s best growth days were behind it.  This was when the argument came up that “Microsoft is becoming a utility rather than the greatest tech growth story of its time.”

5.  Current technology dividend trend… Cisco Systems, Inc. (NASDAQ: CSCO) has become another “avoid” stance for Apple to use as a dividend holdout even if these two companies have little to do with each other.  Cisco refused to pay a dividend for years and years and only paid one after the demands could no longer be ignored.  How has it worked out for that company?  Cisco is in trouble and reorganizing its efforts but Steve Jobs does not want to do this.  Do investors care about the 1.5% yield at Cisco?  All you need to do is to look at its stock performance to decide that answer.  In the Cisco lesson, Apple hopefully knows better than to spend billions and billions simply to buy back stock.

No money was injured while filming

Stock splits usually bring back memories of the old tech bubble and dot-com bubble.  Fundamentally, nothing changes at the company other than that smaller investors get to invest in shares at a lower nominal share price.  Now that the markets have recovered so much, with the recent weeks as an exception, we are seeing many companies with higher share prices starting to announce stock splits. There may even be more current stock splits pending and freshly affected than we can remember seeing in years.

We have seen major stock split announcements from the likes of many companies.  Some of the larger splits are from the following: Clean Harbors, Inc. (NYSE: CLH); Oneok Partners LP (NYSE: OKS); Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN); Cerner Corporation (NASDAQ: CERN); Polycom, Inc. (NASDAQ: PLCM); California Water Service Group (NYSE: CWT); Oceaneering International, Inc. (NYSE: OII); CSX Corp. (NYSE: CSX); Six Flags Entertainment Corporation (NYSE: SIX); II-VI Inc. (NASDAQ: IIVI); Flowers Foods, Inc. (NYSE: FLO); and Church & Dwight Co. Inc. (NYSE: CHD).  We even have a fresh reverse stock split from Pacific Ethanol, Inc. (NASDAQ: PEIXD).  You might think it learned from Citigroup, Inc. (NYSE: C) but Pacific Ethanol did not have a choice if it wanted to keep its listing.

There is also no way to have an article about stock splits without pondering when or what it would take for great companies like Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG) or Netflix, Inc. (NASDAQ: NFLX) to consider splitting their shares.

The road to stock splits has really become more common.  We have not seen this many pending splits in years.  These are not presented in any significant order.

Clean Harbors, Inc. (NYSE: CLH) announced a two-for-one stock split in the form of a dividend payable on July 26, 2011 to holders of record at the close on July 6, 2011.

On Tuesday came word from Oneok Partners LP (NYSE: OKS) that it planned to conduct a two-for-one split of its common and class-B units.  This was its first split and you rarely see “units” split.  It is 43% owned by its general partner, Oneok Inc. (NYSE: OKE).

In May came a biotech stock split from Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN).  It previously approved a 2-for-1 stock split and shares began trading on a split-adjusted basis on May 23.  Shares went from almost $100 to under $50…

Also in May came word from Cerner Corporation (NASDAQ: CERN) that its board of directors had approved a 2-for-1 stock split in the form of a dividend for holders of record on June 15, 2011. The distribution date for the new shares is June 24, 2011.

Polycom, Inc. (NASDAQ: PLCM) announced last month after its pact with H-P that its board of directors approved a two-for-one split of its stock in the form of a stock dividend for holders of record at the close of business on June 15.

We have given much more detail on these individually and we have outlined specifics on each.  In some cases, we have even included what the expected impact could be to the shares if it is a price-changing event. 

We created a separate detailed earnings calendar with full previews already and that can be accessed.  We also have to watch for key inflation data this week as outlined in our economic summary for the key issues to watch this week from government scores on economic data.  Also, here is a list of the Top 7 Analyst Calls of Last Week with big predictions or controversial calls.

American International Group Inc. (NYSE: AIG) was highlighted in Barron’s as a “Moment of Truth” due to the current share sale that has run into issues.  The Treasury wants closer to current prices, but investment bankers think more of a discount has to be offered due to the dilution.  Consider this the second week of a five or six-week ordeal.

Ancestry.com Inc. (NASDAQ: ACOM) is expected to have its secondary price this week, perhaps Tuesday) for 3.75 million shares.  At $40.95 on Friday, this one has a 52-week range of $15.23 to $45.79. Keep in mind that this is from selling holders rather than from the company, but the company did commit to buying $25 million of its stock directly from the holders as part of its $125 million share buyback plan.

Bank of America Corporation (NYSE: BAC) may offer more light on its dividend and on its mortgage putback fears as its annual meeting is Wednesday.  Shares have not been holding up well, particularly when you consider that Bank of America is now well under its book value.

Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) turned in its official earnings for the first quarter on Friday and the $966 EPS per A-Share was under a $1,149 per share consensus from Bloomberg.  This was in the news, but we already knew that the net income was going to be stunted due to losses from natural disasters in its insurance operations.  The data had mostly been released the weekend before at the Annual Shareholder Meeting.

BioMimetic Therapeutics Inc. (NASDAQ: BMTI) is rather small at $371 million in market cap and it is by and large at the pre-revenue stage.  It is also thinly covered by analysts. This coming Thursday will begin a FDA Advisory Panel meeting with a consideration for the company’s new bone graft product.

For starters, Morgan Stanley raised the rating to Overweight this morning and assigned a price target objective of $6.00 per share.  After today, consider that a $60.00 price target.  Earlier this week came a report from UBS with a “Buy” rating and $5.60 target. As far as how this compares to consensus, Thomson Reuters has a mean objective price target of $5.64 for the stock.

As we also noted at earnings, Citigroup listed a book value per share of $5.85 per share and a tangible book value per share of $4.69.  The hope is that with it restructuring and with it having real earnings again that perhaps the current prices will tend to act as a floor since it is under book value.  The wrench that can break that machine’s thought is that Citi is still trying to shrink itself down to a Core-Citi and that means more asset sales or divestitures.

Reverse stock splits are not always bad.  American International Group, Inc. (NYSE: AIG) is currently above $31.00 and its pre-split shares before its 1-for-20 reverse split were trading at an equivalent price of $19.44.  Those shares did tank in the days after that as they were cut in half, but then recovered handily and it took about a month for shares to get back to the pre-split price.  Within another month of that, AIG’s stock had doubled.

The biggest loser here in the Citigroup reverse-split will be the NYSE Euronext, Inc. (NYSE: NYX) as Citigroup trades an average of over 400 MILLION shares a day.  That is often one-tenth or more of the NYSE’s total share volume.  Ouch.

There is a flip-side to consider here.  This could be a boom for a few other stocks.  Traders will likely look for other lower-priced bank stocks.  Many others like Wells Fargo & Co. (NYSE: WFC) and J.P. Morgan Chase & Co. (NYSE: JPM) already trade at much higher prices.  They are also far healthier. 

It is possible that this will bring even more trading into Bank of America Corporation (NYSE: BAC) as it has a lower price of $12.32.  It also trades under book value, and that has not really boosted shares as investors and traders are worried that billions more in charges could come from the mortgage mess via foreclosure woes and putback concerns.

We do not expect to see exponential volume gains in smaller low-priced active bank stocks, but it would be easy to expect that traders and speculators will play the lower priced banks when there is big news that impacts the financial stocks.  We think a few of these could become the new go-to Citibank-alternative stocks.

Regions Financial Corporation (NYSE: RF) could be one of those with shares around $7.10 and a market cap of close to $9 billion. Its 52-week trading range is $5.12 to $8.96 and the average daily volume is about 13 million shares.

KeyCorp (NYSE: KEY) is another as the parent of KeyBank. Its shares are close to $8.53, its 52-week range is $7.13 to $9.77, its market cap is $8 billion, and its average volume is close to 15 million shares. 

Popular, Inc. (NASDAQ: BPOP) is close to $3.06 and a market cap of $4.2 billion.  Its 52-week trading range is $2.37 to $3.73. The average volume is about 9 million shares per day.

There are also the two crazy Irish banking stocks.  The Bank of Ireland (NYSE: IRE) is close to $1.90 and the 52-week range is $1.38 to $9.00 and average volume is about 4 million shares. Allied Irish Banks plc (NYSE: AIB) has already seen a reverse split of its own.  Its shares are around $3.18 and the adjusted 52-week range is $2.00 to $18.65 with an average daily volume of 1.6 million shares. 

Another bank from the lands of the PIIGS could be National Bank of Greece SA (NYSE: NBG).  Its ADRs trade only at $1.41, its 52-week range is $1.35 to $3.23, and the average volume is closer to 6 million shares a day. 

Citigroup is about to look a lot different starting next week.  Some of these low-priced bank shares may see a rise in share volume when financial news hits, but some likely will not.  Stay tuned.

JON C. OGG