JPMorgan Chase Unable to Escape Mortgage Market Losses
is reporting some tougher news than we had expected today, as the company has had to take a $1.5 billion writedown on mortgage-backed securities and loans. What may have led to this was the recent Merrill Lynch action, in which the company unloaded mortgage-backed securities at 22 cents on the dollar. This move may have led to the drop in the prices of similar securities.
This news comes on the heels of New York State Attorney General Andrew Cuomo's naming JPMorgan among the financial institutions included in the ever-widening probe of the stalled auction-rate securities market.
We had recently upgraded the stock, but this news has us thinking that the cleanup will take longer than we had originally expected. We are removing the stock from our "Recommended" list and will monitor the news events closely. We hope to see the company get through this, but in the meantime, investors may want to watch from the sidelines.
JPMorgan is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.4 out of 5 stars.
Morgan Stanley Faces More Damage
has announced that the company is going to buy back $4.5 billion of auction-rate securities at par it sold to retail clients, before the market for the securities failed in February. The company also said it made good on any losses suffered by retail clients who bought auction-rate securities through the firm before Feb. 12 and sold the securities at a loss between that date and Aug. 11.
The company is also reaching out to institutional investors that may have seen similar losses in their portfolios. Management is saying this latest event may take more than a year to clean up.
We had recently upgraded Morgan Stanley shares, but this news has us doing a reversal. We are now removing the shares from our "Recommended" list. Although some investors may have felt this was coming, the size of the settlement and length it may take has us moving to the sidelines until we get a better handle on the company's ability to get through the current mess.
Morgan Stanley is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.4 out of 5 stars.
Watson Wyatt Worldwide: Will Consulting Profits Continue?
Watson Wyatt Worldwide
delivered a good earnings report last night, which saw sales rise 17% to $453.8 million. The company also beat earnings per share estimates by 15 cents.
The company specializes in many areas, including managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services.
Management is giving a somewhat optimistic outlook for 2009, expecting revenues to be in the range of $1.85 billion to $1.90 billion and earnings per diluted share for the year are expected to be in the range of $3.70 to $3.77. Consensus estimates have the company at EPS of $3.71 and revenue of $1.86 billion.
We are removing Watson Wyatt shares from our "Recommended" list for now, as the dividend yield of 0.5% (based on last night's closing stock price of $59.80) does not offer an adequate cushion, and the guidance was not as strong as we would have liked. The shares are not super expensive at current levels, but we don't see enough of a catalyst at this point to hold on to the shares.
Watson Wyatt is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.3 out of 5 stars.
Fluor Delivers Great Earnings, but Now What?
came through with a solid earnings report and raised its earnings per share guidance. The company now sees a profit in the range of $3.65 to $3.80 per share, up from a previous forecast of $3.30 to $3.45.
Revenue rose by 37% to $5.8 billion, up from $4.2 billion in the second quarter of 2007, driven primarily by significant growth in the Oil & Gas and Power segments. The company recently split its shares 2-for-1.
Unfortunately, we are looking ahead -- as Wall Street does -- and we are concerned that the company's energy client base will start to slow their construction plans, due to the rapid decline in oil and commodity prices. This slowdown would leave Fluor in a potentially vulnerable spot, and we are removing the shares from our "Recommended" list. Investors may see a bounce in Fluor shares, as the stock is becoming oversold, but we only see the bounces as opportunities to lock in some profits and move to the sidelines.
Fluor is not a recommended dividend stock at this time, holding a Dividend.com rating of 3.3 out of 5 stars.
UnionBanCal Receives Buyout Offer
, a name we upgraded back on July 30 at $54.68, has received a buyout offer from
Mitsubishi UFJ Financial
, Japan's largest bank. Mitsubishi UFJ is offering $63 a share, an 8.3 percent premium to Monday's closing share price, for the 35 percent of the Californian bank it does not already own.
This deal would give Mitsubishi UFJ total ownership of one of the 25 largest banks in the U.S. in terms of assets. UnionBanCal has more than 300 branches across California.
This is nice for investors, as well as for our readers who may have picked up some shares on our upgrade. We would hold the shares here, as there is a possibility that Mitsubishi bumps up the bid a bit. Either way, a nice exit and quick return for new investors in the stock.
UnionBanCal is a "Recommended" dividend stock, holding a Dividend.com Rating of 3.6 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.