CME Group owns and operates the Comex and Nymex commodities exchanges as well as the Chicago Mercantile Exchange and the Chicago Board of Trade. The company pulled out of the bidding for the London Metals Exchange earlier this week.

CME stated the reason for the split:

We believe that splitting CME Group stock will appeal to a broader, more diverse mix of investor portfolios. By making our shares attractive to more people, we have potential to further expand the base of ownership.

In other words, liquidity. Shares closed yesterday at $256.16 and trade an average of about 600,000 a day. Lowering the share price to around $50 will, CME hopes, attract more investors. Over the past 12 months, CME shares are down about -14%.

CME, as well as the IntercontinentalExchange Inc. (NYSE: ICE), the Depository Trust and Clearing Corp., and Chicago-based OCC (formerly the Options Clearing Corp.) have been designated as systemically important financial institutions. The designation means more regulatory oversight and perhaps larger reserves to withstand a debacle similar to the MF Global implosion.

Paul Ausick

Johnson & Johnson (NYSE: JNJ) is playing catch-up to other DJIA healthcare players and the new yield is closer to 3.8%.  Call this the 50th consecutive year of dividend hikes.

Wednesday was a very different day in Big Oil.  Exxon Mobil Corporation (NYSE: XOM) went ahead and raised its dividend to catch its yield up to Chevron Corporation (NYSE: CVX).  Something strange happened along the way: Chevron went ahead and raised its dividend much sooner than expected… and on the same day! FULL STORY

The Coca-Cola Company (NYSE: KO) tried something new, or old.  It went back to the 1990s by announcing a stock split for the first time in well over a decade.

International Business Machines Corporation (NYSE: IBM) lifted its payout by 13% and showed why it may still rise to $230 over the next year.

From the Department of It’s About Time… The NASDAQ OMX Group, Inc. (NASDAQ: NDAQ) finally decided to do the right thing by initiating its first-ever dividend.

Investors rely heavily on utilities now for the high dividend yields of 5% or so.  In fact, utility stocks are the new CDs for safe income investors.  We saw two very different takes on the outlook for utilities and their dividends ahead.  This one hits American Electric Power Co., Inc. (NYSE: AEP) and several other key utilities.

Enjoy the rest of your weekend!

JON C. OGG

The company’s board of directors announced that it has voted to recommend a two-for-one stock split.  While this would be the first split in 16 years, it is the 11th stock split in its 92-year history.  The company will effectively increase the number of authorized shares from 5.6 billion shares to 11.2 billion shares and this and other matters will be voted on at a special shareowners meeting anticipated to be held on July 10, 2012.

Keep in mind that Pepsico, Inc. (NYSE: PEP) reports earnings this week.  Pepsi’s dividend yield is 3.1% and Coca-Cola’s dividend yield is 2.8%. It has been almost equally long since Pepsi had a stock split and the Pepsi price of $66.51 against a price of $74.12 for Coca-Cola.

On a longer-term basis, Coca-Cola intends to double its revenues this decade.  It is a plan that “provides a clear roadmap for creating value for our consumers, customers, bottling partners and shareowners.”

JON C. OGG

The cost-per-click is continuing to head lower, but the traffic was up.  Google noted a 12% drop from a year ago and down 6% from the prior sequential quarter. Aggregate paid clicks rose 39% over the first quarter of 2011 and increased approximately 7% over the fourth quarter of 2011.

Adjusted earnings came to $10.08 EPS and its quarterly revenues rose 24% from a year ago to $10.65 billion, but the Traffic Acquisition Costs were $2.15 billion or 25% of advertising revenues.  That puts an adjusted revenue figure at $8.5 billion on an adjusted apples to apples basis.  Thomson Reuters had estimates at $9.65 EPS and $8.15 billion in sales.Non-GAAP operating income in the first quarter of 2012 was $3.94 billion, or 37% of revenues.

Google ended the quarter with some $49.3 billion in cash and marketable securities.

Google-owned sites had revenues of $7.31 billion, or 69% of total revenues, a gain of 24% from the first quarter 2011 revenues of $5.88 billion.  Google’s partner sites generated revenues of $2.91 billion, or 27% of total revenues, and that is up 20% from first quarter 2011.  Revenues from outside of the United States came to $5.77 billion, representing 54% of total revenues in the first quarter of 2012, compared to 53% in the fourth quarter of 2011 and 53% in the first quarter of 2011.  Google also employed 33,077 employees globally, up from 32.467 at the end of 2011.

As far as the new share structure, here is the quote from Larry Page: “Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It’s effectively a two-for-one stock split—something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.”

Google closed up 2.3% at $651.01 today and shares are trading around $655 in the after-hours session.

JON C. OGG

The key technology dividend sinners are as follows: Adobe Systems Inc. (NASDAQ: ADBE); Dell Inc. (NASDAQ: DELL); eBay Inc. (NASDAQ: EBAY); EMC Corporation (NYSE: EMC); Google Inc. (NASDAQ: GOOG); Symantec Corporation (NASDAQ: SYMC); and Yahoo! Inc. (NASDAQ: YHOO).

We have given some detail on each here, including the history and how able a company is to begin paying a dividend.  In the total liquidity calculations we have included what the companies list as their cash, cash equivalents, short-term investments, and also included the long-term investments.  No consideration has been made for inventory, receivables, and other hard assets.  Another metric we used was a 40% income payout model to see what sort of yields investors could get without even touching the capital reserves.  We have used operating and non-GAAP estimates for calculating theoretical dividend yields.

Adobe Systems Inc. (NASDAQ: ADBE) is in the dividend sinning club out of the S&P 500 technology group.  The company has a market value of close to $16 billion and it has been a public company since the 1980′s if you can believe it.  The company does not pay a dividend currently and it has not indicated any intention to.  With markets being mostly established, we would wonder if it needs to hold back more capital for even more acquisitions.  The company has over $3 billion in liquidity on its books.  Adobe could offer a yield of about 2.9% if it were to adopt a 40% adjusted income payout to shareholders.

Dell Inc. (NASDAQ: DELL) has been making acquisitions here and there to bolster its move from just being a PC company into a PC and information technology company.  While it has more than $6 billion in direct long-term debt, Dell also has what is close to $20 billion in total liquidity.  Rivals HP and IBM pay dividends and now Apple pays a dividend.  What is so interesting here is that with a $30 billion market value, Dell could be a candidate for a solid one-time dividend this year and a hefty payout ratio going forward.  It is just too hard to argue that its core market is growing.  What is amazing is that Dell could pay out roughly a 4.9% dividend yield if it adopted a 40% of adjusted earnings to be paid out as dividends with touching a penny of its cash on hand.

eBay Inc. (NASDAQ: EBAY) is a dividend sinner of epic proportions.  It has made acquisitions and it has made sales, and the real growth now lies in the PayPal market rather than in the auction markets.  The only real need for eBay to keep a hold of its $8+ billion in total liquidity is if it can find a huge international outfit to buy.  If eBay adopted a 40% payout ratio of income, without even considering its mountain of cash today on the books, eBay could be offering shareholders a 2.4% yield without denting its cash and reserves.

EMC Corporation (NYSE: EMC) has proven to grow and grow in the world of storage.  With the cloud growth and with storage being nearly infinite, the company has been able to grow organically and via acquisitions and has preferred to use its capital for growth over dividends.  It also owns a super-majority stake in VMware Inc. (NYSE: VMW).  The storage leader has almost $11 billion in total liquidity and it carries almost no long-term debt.  Without touching a penny of its cash and liquidity, a 40% adjusted income payout would generate a dividend yield of almost 2.4%.

Google Inc. (NASDAQ: GOOG) may be in the midst of a Motorola integration and acquisition, but it seems unlikely that it will need its cash arsenal in order to make a large acquisition. With such a huge amount of the search market, other acquisitions might be just yet another distraction from the core markets.  As of December 31, 2011, its total liquidity was a whopping $44.6 billion against a market cap of just over $200 billion.  Google could easily pay a 10% one-time dividend while dividend tax rates are low and could offer a hefty quarterly dividend and still grow its cash in the years ahead.  If Google paid out 40% of its adjusted income without considering one-cent of its mountain of cash it could offer a 2.6% dividend yield today.

Symantec Corporation (NASDAQ: SYMC) has such little shareholder enthusiasm that it needs to consider more return of capital.  It did just recently announce a $1 billion share buyback against its $13.3 billion market cap.  The company has about $2.4 billion in liquidity, but it also has about $2 billion in direct long-term debt.  If the company did not use any leverage, a 40% income payout ratio would actually give a dividend yield of about 3.5% as of today.  With shares around $18.00, this one has been stuck like chuck in a long-term range of $15 to $20 since its huge Veritas acquisition.

Yahoo! Inc. (NASDAQ: YHOO) is the obvious candidate for a dividend.  Management has decided to keep that liquidity arsenal of more than $7 billion at bay to help fund its turnaround.  It is also hard to know what will become of the Alibaba and Yahoo! Japan stakes for liquidity in the equation.  If Yahoo! were to just pay out 40% of its expected earnings from operations without tapping any cash on hand then it could offer a 2.1% dividend yield today without much worry.  This is an ongoing call and it will not likely be answered until the international assets are properly monetized.

Your email address

subscribe

terms and conditions

JON C. OGG

The company declared an initial dividend of $2.65 per share, with the first dividend being paid out in the fiscal fourth quarter of this year (starting July 1).

Apple will buy back up to $10 billion worth of its common stock, and this effectively neutralizes the impact of employee stock option dilution.  The buybacks will start in its fiscal year 2013, which begins on September 30, 2012.

Apple believes that this amount of spending versus income will maintain a war chest for strategic opportunities and will leave it with plenty of cash to run the business.

JON C. OGG

Guggenheim Partners, LLC, has now executed that 1-for-10 reverse share split and Yahoo! Finance mistakenly has it trading up 900% or so. While the ETF will continue to trade on the NYSE Arca under the same “TAN” stock ticker, it may take a while for all of the quote systems to catch up.

Yahoo! Finance indicates a 907% gain, Google Finance shows it properly with a 0.59% gain, and AOL’s DailyFinance site has it properly listed as well. 

First Solar, Inc. (NASDAQ: FSLR) is the top holding of the US-traded stocks with over 10% weighting, and this is down over 75% from its 52-week highs.

GT Advanced Technologies, Inc. (NASDAQ: GTAT) is another high-weighting at almost 7.3% weighting.  This one is still down not even by half from its 52-week high, a miracle by solar stock standards today.

TRINA SOLAR LTD. (NYSE: TSL) is 5.22% of the weighting, and it is down by more than two-thirds from its 52-week high..

MEMC Electronic Materials, Inc. (NYSE: WFR) accounts for 4.3% of the weighting and it has been a painful hold down by almost three-quarters from its 52-week high.

What was the best way to make a small fortune over the last year?  By investing a large fortune in solar stocks of late.

JON C. OGG

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