Check Out These Total-Return Holdings
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With Treasury yields at near-zero levels, investments that provide a solid yield while also offering price upside look like appealing considerations for one’s portfolio at this time. The telecom, energy, pharmaceutical, food processing, bank, financial, restaurant, REIT and pipeline operator sectors are places to look for such gems. Here are just a few, all yet to report December-quarter earnings, worth purchasing:
CenturyLink (NYSE: CTL)
Among the telecom giants, this one has the highest yield at around 7%, and the dividend is likely to remain intact or increase over time. The possibility of a sizable acquisition seems decent given its history, having purchased Qwest Communications in 2011 and Embarq in 2009. But, don’t count this stock out for price appreciation, as its momentum is positive and management is focused on the expansion of faster-growing services. For instance, it is building its bandwidth capacity in Ethernet data services, as well as expanding its television services into former Qwest markets and enhancing its managed hosting and cloud computing service offerings. As spending on these initiatives may limit profit gains in 2013, CTL shares are more of a long-term investment. Enjoy the healthy payout in the meantime.
Buckeye Partners, L.P. (NYSE: BPL)
Master Limited Partnerships that typically distribute all income to unitholders make for solid income holdings. Many pipeline operators are organized as MLPs and can sometimes be found at compelling valuations. BPL units, down about 18% in the past 12 months, appear poised for a price recovery. Earnings comparisons have turned positive, a trend likely to continue based on strengthening demand and increased market share. Plus, given analysts’ estimates, the forward P/E valuation is attractive.
Buckeye’s strategy consists of acquiring assets with the potential to boost cash flows. It is looking to expand geographically and by product line, while improving the profitability of existing infrastructure. The company’s long-term (3- to 5-year) plan involves heightened production from marine terminals, including a recently acquired facility in Perth Amboy, New Jersey, formerly owned by Chevron.
BPL units yield nearly 8% and are a good selection for a near term or a long-term income portfolio.
Great Plains Energy (NYSE: GXP)
This utility is compelling not only for its 4% yield, but because stock price and earnings patterns are favorable. Electricity providers’ stocks are usually stable, but a number of them have fallen of late, creating opportunities. On that note, see my previous blog dated Jan. 7, 2013, where I named several others, specifically HE, ED, and TAC for their bounceback potential.
Great Plains’ subsidiaries are Kansas City Power & Light Company and Greater Missouri Operations Company. It also owns MPS Merchant, a natural gas company. Pending rate hikes are apt to support improved top- and bottom-line figures. Of note, the company issued 17 million shares in mid-2012, diluting earnings to some degree. With this having been priced in, the shares may well be positioned for a further rebound.
Sonoco Products Company (NYSE: SON)
Sonoco is another company that has come down in market value, and is backed by solid fundamentals. The paper and packaging company is benefiting on the top and bottom lines from the 2011 addition of Tegrant, a producer of highly-engineered and protective security retail packaging solutions. Product margins are improving as sales climb. Its restructuring activity during 2012 is resulting in improved productivity. As such, the company may well be in store for a good year in 2013.
The Tegrant purchase essentially created a new business segment, contributing 10% to 15% of total revenues. Sonoco’s core businesses, Consumer Packaging and Paper and Industrial Converted Products have struggled. It also operates a modestly-sized Packaging Services unit.
SON shares hold appeal to income investors and those looking for a turnaround. They yield about 3.8% at the current quote.
These stocks are worthwhile selections for a total return portfolio at this juncture.
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