Time Warner to Finally Spin Off AOL

Media giant

Time Warner

(TWX)

said Thursday that it plans to spin off its

AOL

segment, ending a hapless eight-year merger that failed to produce many positive results for the two companies.

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AOL will be spun off from Time Warner toward the end of 2009, and operate as a separate company. The new entity will be run by former

Google

(GOOG) - Get Report

ad executive Tim Armstrong, whom AOL brought in back in March in an attempt to salvage the once-mighty company.

Time Warner, which owns 95% of AOL, will buy out Google's 5% stake in the third quarter for an undisclosed amount and then spin off the company later in the year.

Time Warner's CEO Jeff Bewkes said that "

AOL becoming a standalone company will give it more focus and strategic flexibility."

AOL actually bought media giant Time Warner for $147 billion back in 2001, which has since become known as one of the worst mergers in U.S. history. Time Warner quickly had to absorb almost $100 billion in charges as a result of AOL's rapidly decreasing value in 2002 and 2003, soon dropping the "AOL" from the company's name.

With its once-dominant dialup Internet access revenue continuing to fade, AOL increasingly relies on its strength as a web portal to generate advertising income. In 2002, AOL had 26.7 million subscribers -- at latest count, the company had only 6.3 million dial-up customers.

Time Warner shares were mostly flat Thursday morning following the announcement.

The company has a 1.09% dividend yield, based on last night's closing stock price of $23.00. The stock has technical support at the $18 level. If the shares can begin to build momentum on this morning's announcement, we see overhead resistance around the $26-27 price levels. We would remain on the sidelines for now. Time Warner holds a Dividend.com DARS Rating of 3.2 out of 5 stars.

Procter & Gamble's 2010 Earnings Guidance Falls Short of Expectations

Consumer products giant

Procter & Gamble

(PG) - Get Report

on Thursday forecast lower-than-expected fiscal 2010 earnings, but its shares remained resilient as the company said it plans to invest in new markets and products.

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The Cincinnati-based company said it expects fiscal 2010 earnings to fall in a range of $3.65 to $3.80 per share, with net sales ranging from down 2% to up 1%. On average, Wall Street analysts had expected guidance of $3.92 per share.

For fiscal 2009, P&G said it expects net sales to decline between 2% and 4%, with profits between $4.20 and $4.25 per share. P&G shares rose 4 cents or 0.1% in late morning trading Thursday.

We are still attracted to shares of P&G at these levels. We were not happy to hear about the lowered guidance, but we still believe the risk/reward opportunity is good. The company has a 3.40% dividend yield based on last night's closing stock price of $49.60. P&G Company is not recommended at this time, with a Dividend.com DARS Rating of 3.5 out of 5 stars.

Costco Third-Quarter Profit Falls 29% on Charges, Stronger Dollar, Lower Sales

Warehouse club operator

Costco

(COST) - Get Report

said Thursday that its fiscal third quarter profit fell 29% from year-ago levels, hampered by a one-time charge. The Issaquah, Wash., company reported a fiscal third-quarter net profit of $209.6 million or 48 cents per share, down from $295.1 million or 67 cents per share in the year-ago period.

The latest quarterly results were hurt by a $34 million charge stemming from a lawsuit settlement, as well as negative effects from the stronger dollar. Revenue for the quarter fell 5% from year-ago levels, to $15.81 billion from $16.61 billion. On average, Wall Street analysts expected earnings of 53 cents per share on revenue of $16.16 billion, excluding one-time items.

Costco said that same-store sales fell 7% in the quarter, but excluding the effect of lower gas prices and the stronger dollar, same-store sales actually rose 2%. Costco shares fell $2.14 or 4.4% in morning trading Thursday.

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We had removed shares of COST from our "Recommended" list back on Sept. 22, when the stock traded at $66.09. The company has a dividend yield of 1.47%, based on last night's closing stock price of $48.83.

The stock has key support in the $43 to $44 price area but there is the potential for the company to gap down to the low $30s if those levels fail to hold. If the shares can continue to gain momentum from today's call, we see overhead resistance around the $51 to $55 price levels. We would remain on the sidelines. Costco holds a Dividend.com DARS Rating of 3.2 out of 5 stars.

Heinz Fourth-Quarter Profit Drops 10%, Matches Street View

Famous ketchup-maker

H.J. Heinz

(HNZ)

said Thursday that its fiscal fourth-quarter profit fell 10% from year-ago levels, hurt by the stronger dollar and a reduction in spending by restaurants.

The Pittsburgh-based company reported fiscal first quarter net income of $175.1 million or 55 cents per share, down from $194.1 million or 61 cents per share, in the year-ago period. Revenue fell 6% in the quarter, to $2.54 billion from $2.69 billion last year. On average, Wall Street analysts expected a profit of 55 cents per share on slightly higher revenue of $2.56 billion.

Heinz said that the latest quarter was hampered by lower consumer and restaurant spending, as well as effects of the stronger dollar, which hurt the company's overseas sales. As for full-year 2009, the company said net income rose 9% to $923.1 million or $2.90 per share, from $844.9 million or $2.63 per share in the previous year. Full-year sales rose a modest 1% to $10.15 billion from $10.07 billion last year.

Looking ahead, Heinz predicted a fiscal 2010 profit of $2.60 to $2.70 per share, well below analyst estimates of $2.90 per share. However, the company said it sees full-year 2010 sales growth between 4% and 6%, which implies sales between $10.5 billion and $10.7 billion and above analysts' estimates of $10.17 billion.

Heinz also raised its quarterly dividend, albeit slightly to 42 cents per share, up half a penny from 41.5 cents previously. The dividend will be payable on July 10 to shareholders of record as of June 24. Heinz shares were mostly flat in morning trading Thursday.

We are still attracted to shares of Heinz at these levels and believe the stock offers an opportunistic risk/reward situation. The company will now have a dividend yield of 4.63% based on the higher payout and last night's closing stock price of $36.26.

Heinz is a "recommended" stock, holding a Dividend.com DARS Rating of 3.5 out of 5 stars.

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At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.