The unofficial closing bells put the DJIA up about 6 points to 12,883.95 (0.04%), the NASDAQ rose nearly 12 points (0.41%) to 2,915.86, and the S&P 500 rose 0.22% or about 3 points to 1,349.97.

There were several analyst upgrades and downgrades today, including Yum! Brands Inc. (NYSE: YUM) cut to ‘neutral’ at Goldman Sachs; Demand Media Inc. (NYSE: DMD) cut to ‘underweight’ at Morgan Stanley; Annaly Capital Management Inc. (NYSE: NLY) cut to ‘market perform’ at FBR; Morgan Stanley (NYSE: MS) cut to ‘hold’ at Collins Stewart; and UBS AG (NYSE: UBS) cut to ‘sell’ at Deutsche Bank.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Agrium Inc. (NYSE: AGU) is up 2.16% at $82.95; CVS Caremark Corp. (NYSE: CVS) is up 1.18% at $43.59 after posting a new 52-week high of $44.08 earlier in the day; Ralph Lauren Corp. (NYSE: RL) is up 9.8% at $172.50 after posting a new 52-week high of $178.47 earlier today; Reynolds American Inc. (NYSE: RAI) is down -1.35% at $39.57; Time Warner Inc. (NYSE: TWX) is up 0.3% at $38.21 after posting a new 52-week high of $39.23 earlier today; Walt Disney Co. (NYSE: DIS) is up 0.95 at $41.34; Wyndham Worldwide Corp. (NYSE: WYN) is up 5.6% at $43.22 after posting a new 52-week high of $43.36 earlier today; and Buffalo Wild Wings Inc. (NASDAQ: BWLD) is up nearly 17% at $82.04 after posting a new 52-week high of $82.45 earlier today.

Our preview of tomorrow’s earnings releases is here. Also see our coverage of earnings for Cisco Systems Inc. (NASDAQ: CSCO) due after markets close today

Other standouts from today include the following stocks:

Ceasars Entertainment Corp. (NASDAQ: CZR) is up more than 70% at $15.32. The casino owner completed its IPO today, with 1.8 million shares going out at $9/share. We have some issues with this IPO.

FriendFinder Networks Inc. (NASDAQ: FFN) is up nearly 33% at $1.95. The adult dating site had no news today, so this must just be more halo effect from Facebook — or something else.

Teekay Tankers Ltd. (NYSE: TNK) is down more than -12% today at $3.98. The shipping company this morning priced a secondary stock offering of 15 million shares at $4/share.

Akamai Technologies Inc. (NASDAQ: AKAM) is up about 2% at $34.33. The internet company acquired a Canadian company today, and reports earnings after markets close today. We have more coverage here.

NeuroMetrix Inc. (NASDAQ: NURO) is down more than -17% at $0.95 after posting a new 52-week low of $0.94 earlier today. The medical device maker priced a secondary offering of 10.5 million shares at $1/share this morning.

Stay tuned for Thursday. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – New unemployment benefits claims
• 10:00 a.m. – Wholesale trade report
• 10:30 a.m. – EIA weekly natural gas storage report
• 1:00 p.m. – Treasury 30-year bond auction
• 4:30 p.m. – Federal Reserve balance sheet and money supply

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Paul Ausick

The earnings previews are for the following: Akamai Technologies, Inc. (NASDAQ: AKAM); Atmel Corporation (NASDAQ: ATML); Cisco Systems Inc. (NASDAQ: CSCO); Computer Sciences Corporation (NYSE: CSC); Enbridge Inc. (NYSE: ENB); Groupon Inc. (NASDAQ: GRPN); Ingram Micro Inc. (NYSE: IM); IntercontinentalExchange Inc. (NYSE: ICE); Level 3 Communications Inc. (NASDAQ: LVLT); Moody’s Corporation (NYSE: MCO); News Corp. (NASDAQ: NWSA); PAA Natural Gas Storage L.P. (NYSE: PNG); Plains All American Pipeline L.P. (NYSE: PAA); Prudential Financial Inc. (NYSE: PRU); Ralph Lauren Corporation (NYSE: RL); Reynolds American Inc. (NYSE: RAI); Sprint Nextel Corporation (NYSE: S); Time Warner Inc. (NYSE: TWX); Vical Inc. (NASDAQ: VICL); Visa Inc. (NYSE: V); and Whole Foods Market Inc. (NASDAQ: WFM).

We have compiled earnings preview on each company using Thomson Reuters consensus estimates and added color on each if applicable.  Some are market moving, some are sector moving, and some are just interesting for traders to watch around the earnings reports.

Akamai Technologies, Inc. (NASDAQ: AKAM) has estimates of $0.40 EPS and $311.26 million in revenues.

Atmel Corporation (NASDAQ: ATML) has estimates of $0.09 EPS and $401.5 million in revenues.    Growth is gone, but it still screens as value.

Cisco Systems Inc. (NASDAQ: CSCO) has estimates of $0.43 EPS and $11.23 billion in revenues.  Preliminary preview notes are available.

Computer Sciences Corporation (NYSE: CSC) has estimates of $0.58 EPS and $3.98 billion in revenues.  As a reminder, CSC has warned on earnings.  This one shows up as a value stock in all sorts of investor screens but it is a value trap.

We did not substitute Reynolds American Inc. (NYSE: RAI) nor Lorillard, Inc. (NYSE: LO) for Altria in the dividend portfolio because of the industry woes being present.  As far as Philip Morris International, Inc. (NYSE: PM), it has other issues like currencies to deal with, as well as having a lower dividend rate and even some nations increasing their legal actions against tobacco.

apparently Barron’s feels the same in the concerns.  We expected the cover story this last weekend to be about all of the outlooks for a better 2012 or something more broad.  Instead, the cover story was “Up In Smoke” with the note that Altria’s prospects are low with the cigarette sector outlook being bad and with Marlboro losing market share as cheaper brands are winning out.

Barron’s take… Altria could fall 15%, and with shares having been around $30.00 that could take the stock back under $26.00.

Altria shares are trading down 3.3% at $28.67 after a $29.65 close on Friday.  Apparently investors are giving up on smoking for a new year resolution as well.

If you want to gain access to the 2012 Model Dividend Portfolio, simply sign up in the box below for our morning email list to hear about analyst upgrades and downgrades, moves from Warren Buffett and other top gurus, and other key features from the 24/7 Wall St. staff.

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JON C. OGG

Altria Group Inc. (NYSE: MO) has now hit a new adjusted high and shares have even crossed above the $30.00 threshold.  When we recently questioned how safe these tobacco dividends were earlier in December, Altria shares were around $28.65.  When we eliminated the tobacco sector from our 24/7 Wall St. 2012 Model Dividend Portfolio, the admission was that it might be a tad soon but that the share price was getting ahead of the underlying fundamentals.

Our take is that Altria would become very attractive again if it was to get closer to $25.00.  Admittedly, that might be closer to $26.50 now that investors have proven willing to invest in Altria above $30.00.  Altria’s 5.6% yield now compares to a dividend yield north of 6% for telecom giant AT&T Inc. (NYSE: T).

The tobacco sector is still a safe haven to hide in during market sell-offs, but the longer-term risk/reward is reaching above our parameters for investors with a 5-year or longer horizon.

Read Also:  Even More DJIA Dividend Hikes Coming Soon 

We have not added Reynolds American Inc. (NYSE: RAI) nor Lorillard Inc. (NYSE: LO) as replacement stocks for Altria in the Model Dividend Portfolio.  Again, if the share prices come back down then our interest may increase.  The good news is that Philip Morris International, Inc. (NYSE: PM) still has a safe dividend and it has plenty of income coverage to hike in the future.  The international tobacco play has “only” a 4.1% dividend yield and it has extreme currency risks.  The last hike was a large one from $0.64 to $0.77, and even if the company made the sale nominal jump to $0.90 per quarter it would be paying out less than 70% of its expected income per share.
 
Our belief is that the domestic tobacco market has too many headwinds in the future, but none of the threats are legal cases.  The biggest fear is that Joe Public has finally made a healthier move and more smokers are dropping out of the population.  Some die, but some quit. 

Over the last month we have read about price hikes being passed down to distributors.  After all, it isn’t really as if the stores can substitute out Joe Camel for the Marlborough man or vice versa.  Lorillard was shown to be passing on a $0.06 per pack hike, while a nickel hike was coming from Altria and Reynolds.  What if the government or distributors argue that there is price collusion happening?  Too many price hikes may eventually at some point drive away more smokers. States, cities, and counties keep turning to tobacco sales for higher taxes as well.

Investors should be at least concerned that the only way to grow earnings is by price hikes to keep juicing up the dividends.  Case volumes keep shrinking and operating costs and tobacco crop prices ultimately can only be cut so much.  There are only so many ways to diversify for growth as well.  Smokeless tobacco has been one push, and the non-tobacco “e-cigs” are another…

Read Also: MLP ‘Dividend’ Trends Into 2012

We still maintain that the endless tobacco dividend hike game is yet entirely over.  At the current pace, we could easily see one more annual dividend hike or maybe even two.  Altria’s quarterly dividend went from $0.38 to $0.41, Reynolds went from $0.53 to $0.56, and Lorillard has now had four quarters of a $1.30 payout.  These dividends are now all under 6% because the share prices have risen enough.

When we eliminated tobacco from the 2012 Model Dividend Portfolio, we noted, “Our admission is a simple and humble one: we may be too early on this call.  You have been hearing about the death of the tobacco industry for years.” Tobacco is here today and will still be here tomorrow. 

The biggest fear for investors is that some time in the next year or two it could be the time that one of the tobacco giants says “We cannot afford to hike our dividend this year, but we hope to next year.”  If investors ever fear that to be the case, then that will mark the end of the tobacco run. 

Except for Lorillard, the stocks are above the consensus analyst price targets: Altria’s target is $29.00 with a share price above $30.00 and Reynolds American’s share price is $41.71 versus a target price of $40.75.

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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JON C. OGG

The move takes of Altria Group Inc. (NYSE: MO) from the mix, and frankly we are not even adding Reynolds American Inc. (NYSE: RAI) nor Lorillard Inc. (NYSE: LO) currently.  The moves would easily be remedied if these share prices correct, but our belief is that the domestic tobacco market has too many headwinds in the future.  The good news is that none of them are legal.  It is a healthier move as more smokers are dropping out of the population, either by death or by the more preferable method of realizing that continuing to smoke will cause death.

Dow Jones gave some figures that show pricing power this morning, but some could perhaps argue that this is the industry banding together.  Lorillard was shown to be passing on a $0.06 per pack hike, while a nickel hike was coming from Altria and Reynolds.  Frankly, this price hike in our belief is only going to drive away that many more smokers even if it is just a marginal hike.  That hike, and then  some, will be passed on to Joe Public.  States, cities, and counties keep turning to tobacco sales for higher taxes as well.

Price hikes are now the only way that tobacco companies can grow earnings and cash flow enough to allow for higher dividends and continued share buybacks.  Case volumes keep shrinking and costs ultimately can only be cut so much.  We also still wonder about the risks of the nasty labels, even if that now appears to not be as large of an issue ahead right now. 

So, our take is not that the dividend game is yet entirely over.  At the current pace, we could see one more dividend hike. Maybe two.  Altria’s quarterly dividend went from $0.38 to $0.41, Reynolds went from $0.53 to $0.56, and Lorillard has now had four quarters of a $1.30 payout.  These dividends are now all under 6%.

We do not see a jeopardy of these being in the defensive stock category for traders, but the stock prices have just risen too far for us to recommend these for long-term dividend investors.  Our admission is a simple and humble one: we may be too early on this call.  You have been hearing about the death of the tobacco industry for years. 

Still, what happens the year that one of the tobacco giants says “We cannot afford to hike our dividend this year, but we hope to next year.”  That will be the end. These tobacco stocks, except for Lorillard, are just too close to their consensus price targets as well.

The good news is that Philip Morris International, Inc. (NYSE: PM) still has a safe dividend and it has plenty of income coverage to hike in the future.

Lastly, we are not full of panic here.  If Altria came back closer to $25.00 or if Reynolds reach back down to $35.00 or so, the we would not hesitate a reconsideration.  We have just seen these shares rise and rise and the yield opportunities are better elsewhere.

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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JON C. OGG

We have tracked only the large buyback announcements made this month in the following companies: The Allstate Corporation (NYSE: ALL); American International Group, Inc. (NYSE: AIG); CBS Corporation (NYSE: CBS); Fidelity National Information Services, Inc. (NYSE: FIS); Pfizer Inc. (NYSE: PFE); Reynolds American Inc. (NYSE: RAI); Starbucks Corporation (NASDAQ: SBUX); Sysco Corporation (NYSE: SYY); Thermo Fisher Scientific, Inc. (NYSE: TMO); Viacom, Inc. (NYSE: VIA-B); and Valeant Pharmaceuticals International, Inc. (NYSE: VRX).

As far as how share buybacks in general matter for stocks, you can always play the buyback leaders via the PowerShares Buyback Achievers (NYSE: PKW), and it is almost exactly in the middle of its 52-week trading range.  Those buybacks outlined below do not include the many $150 million, $100 million, and lower buybacks.  The tally all said and done here so far in just the first half of November of 2011: over $27 billion!!!

The Allstate Corporation (NYSE: ALL) is trying to tell shareholders they are in good hands because the announcement over the next 18 months is that it would repurchase up to $1 billion in common stock.  The market cap today is just over $13 billion.

How can American International Group, Inc. (NYSE: AIG) have a share buyback program?  It announced in early November that it would buy back up to $1 billion in stock.  The $43 billion in market cap is one thing, but the amount of shares still owned by Uncle Sam (or taxpayers) is huge.  Actually, maybe this supports the stock value for us all!

CBS Corporation (NYSE: CBS) added to its prior plan and has authorized the repurchase of up to $1.5 billion in stock.  The current market cap is $16.5 billion, so we’ll leave it up to you to decide if this buyout matters or not.

Fidelity National Information Services, Inc. (NYSE: FIS) announced on November 1 that it was approving for up to $500 million in share buybacks over the next two years.  This compares to $7.4 billion in market capitalization.

Pfizer Inc. (NYSE: PFE) recently expanded its buyback program and it is now authorized to repurchase up to $7 billion worth of common stock.  This is a huge amount but it sounds small when you consider a $151 billion market cap.

Reynolds American Inc. (NYSE: RAI) this week announced a $2.5 billion share buyback plan which is good for the next two and a half years.  This is more than 10% of the company’s stock as the market cap is $23 billion.  Institutions own 46% of Reynolds.

Starbucks Corporation (NASDAQ: SBUX) recently added to its prior buyback plan with up to 20 million shares. This is more than $850 million at current prices, which compares to a market cap of $32.5 billion.

Sysco Corporation (NYSE: SYY) recently boosted its dividend but it also announced that it would repurchase up to 20 million shares of common stock.  This represents about $550 million today and its market cap is just over $16 billion.

Thermo Fisher Scientific, Inc. (NYSE: TMO) recently added $750 million to its prior buyback plan and its market capitalization is $18.5 billion.  The company had only $25 million remaining under a prior buyback and the new buyback is over the course of a year because it expires on November 9, 2012.

Viacom, Inc. (NYSE: VIA-B) must want to try to take itself private.  The market cap is just under $25 billion, but the company recently announced with its positive earnings report that it is expanding its buyback to $10 billion.  While this was an expansion of a prior plan, $10 billion is a massive sum.

Valeant Pharmaceuticals International, Inc. (NYSE: VRX) is a bit odd.  While it announced that it would spend up to $1.5 billion repurchasing securities, this was listed as a buyback of stock and/or debt.  Its market cap is $13.25 billion today.

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JON C. OGG

Lorillard’s introduced a non-menthol Newport product during the quarter, in an effort to extend its best-selling Newport menthol cigarettes and also saw solid retail sales growth in its low-priced Maverick brand. But the lukewarm results are a function of lower wholesale sales even though retail sales improved. The company also got hit with higher costs related to litigation settlement agreements and federal requirements.

The company posted EPS of $1.94 on revenue of $1.62 billion. The consensus estimate called for EPS of $2.03 on $1.14 billion. Gross profit fell year-over-year from 36.1% to 34.7%. To make up for the profit shortfall, the company announced a new $750 million share buyback following a $1.4 billion buyback that was completed in August. The company has about $550 million remaining in the new share repurchase program.

In the first 45 minutes of trading this morning, Lorillard’s shares are down about -4.9%, and while volume is heavier than usual, it is not dazzlingly so. The company’s average daily volume is just less than 2 million shares out of more than 138 million shares outstanding. Almost 97% of the shares are held by institutional investors, who are quite happy with the stock’s yield and less interested in a rising share price. By way of comparison, institutional investors hold about 71% of Philip Morris shares, about 61% of Altria shares, about 46% of Reynolds’ shares, and just under 28% of VGR’s shares.

Given the relatively low turnover in Lorillard’s shares today, one might reasonably conclude that the institutional investors are still satisfied with the dividend and with the company’s new share repurchase program. For institutional investors, tobacco companies’ high dividends are worth holding on for.

With the exception of Philip Morris, the other tobacco company stocks are trading lower today as well, though volumes are not out of the ordinary. Philip Morris shares are up a bit — 0.10% — likely due to a strong report from India’s ITC Ltd., the largest cigarette maker in that country.

Lorillard’s shares are off -4.9%, at $109.98, in a 52-week range of $72.40-$120.00. Altria’s shares are off -0.55%, at $27.30, in a 52-week range of $23.20-$28.14. Reynolds American shares are off -1.66%, at $39.07, in a 52-week range of $19.50-$39.77. VGR shares are off -0.74%, at $17.39, in a 52-week range of $15.37-$19.28.

Paul Ausick

The most attractive stock investments for periods when GDP growth stalls are those of corporations that proved they could improve sales during the 2007-2009 recession. Many of these corporations have additional attractions. They often generate so much cash they can afford to pay large dividends. This gives investors yields when the value of many equities fall due to concerns about the economy and in a period that interest rates on bonds are near all-time lows.

Recession-resistant companies are also often part of recession-resistant industries. Many of these industries’ sales come from a number of countries around the world. Their sales may slow in the U.S. and Europe, but remain strong in emerging nations. Coke and P&G are examples of corporations in such industries. Other companies are in sectors whose products are used in almost any economic environment. Tobacco companies like Altria and Reynolds American are examples of these. Still other industries have companies that have appeal in an economic downturn. McDonald’s, which offers many meals for a few dollars, often prospers when people cannot afford fresh groceries or more expensive restaurants.

24/7 Wall St. picked its recession proof companies by choosing: 1) corporations with revenue that grew during the last recession or where sales dropped slightly and profits rose, 2) companies in industries that are not usually sensitive to changes in the economy, 3) corporation that have demonstrated they have the balance sheet to pay large cash dividends, 4) corporations that are large enough to be among the most dominant companies by sales or market share within their sectors, and 5) stocks that trade within 10% of their 52-week highs. With the S&P 500 near a one year low, these are obviously companies that Wall St. thinks will do well over the next several quarters.

This is the 24/7 Wall St. “America’s Recession-Proof Companies”

Anheuser-Busch Inbev SA (NYSE: BUD) is up 0.25% at $52.84 and the 52-week range is $49.05 to $64.77.

Altria Group, Inc. (NYSE: MO) is FLAT at $26.81 and the 52-week range is $23.20 to $28.13; Reynolds American Inc, (NYSE: RAI) is up 0.3% at $37.60 and the 52-week range is $29.05 to $39.87.

Campbell Soup Company (NYSE: CPB) is up 0.7% at $32.59; 52-week range is $29.69 to $36.99.  ConAgra Foods, Inc. (NYSE: CAG) is down “only” 0.4% at $24.12; 52-week range is $21.02 to $26.60.

Kimberly-Clark Corporation (NYSE: KMB) is up $0.03 at $71.04; 52-week range is $61.00 to $71.78.  Procter & Gamble Company (NYSE: PG) is up $0.05 at $63.23; 52-week range is $57.56 to $67.72.

Sometimes a little win or a small loss feels like a big victory.  With just under an hour until the market close, the DJIA is down almost 200 points at 10,720 and the closest handle on the S&P 500 down almost 2.1% is 1,108.  Another day, another bunch of lost dollars for the public.

JON C. OGG

The new annualized dividend rate is $1.64 per common share and the $26.01 share price and that generates a new dividend yield of 6.3%.  That is even above our mid-point of the latest Great Dividend Portfolio for Uncertain Times recently published.

Altria targets roughly an 80% payout ratio of its income for dividends.  It is not exactly like it is looking for huge acquisitions ahead.

The best statistic is this… Altria has increased its dividend 45 times in the last 42 years.

Reynolds American Inc. (NYSE: RAI) is probably another two quarters out before another dividend hike is announced, and its current yield is about 5.85%.  Vector Group Ltd. (NYSE: VGR) could have a hike at any time, but the $0.40 per quarter payout with an $18.27 price generates a current dividend of 8.7%.

It is amazing to be in a business that kills the customers and earnings can keep rising and rising.

JON C. OGG