3. CenturyLink (CTL)
Company Profile: CenturyLink is the third-largest telecommunications company in the U.S. based on access lines, providing phone, high-speed Internet, and wireless services to customers in 37 states.Sector Representation: Telecommunication services Share Price: $36.30 (Dec. 5) Potential Upside: 37.7% based on a price target of $50 Investment Thesis: Analyst David Barden says the CenturyLink is inexpensive with a high dividend yield, and that investors could be in store for buybacks or dividend growth in 2012. "We view yield-based wireline stocks as the equivalent of equity bonds where the required return (yield) is a function of relative risk ([free cash flow] payout ratio)," Barden writes. "Within this framework CTL screens positively among yield stories at 8.4% yield from a 48.5% [the 2012 estimated] payout ratio."
2. Marathon Oil (MRO) Company Profile: Marathon Oil is an independent upstream company. The company has international operations in exploration and production, oil sands mining and integrated gas. Sector Representation: Energy Share Price: $28.81 (Dec. 5) Potential Upside: 73.6% based on a price target of $50 Investment Thesis: Analyst Doug Leggate picks Marathon Oil out from his entire coverage universe because of the company's attractive valuation, high quality and yield. "We believe the recent announcement to separate the company into two separate units that focus on exploration and production and refining, will release value from the shares and demand a higher premium to the current share price," Leggate writes.
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