VF Corp. Cuts Outlook but Raises Dividend

Clothing and apparel maker VF Corp. lowered its revenue-growth forecast as the consumer spending slowdown has affected the company's clothing sales.

The company, whose brands include Wrangler, Lee, Rustler, Rider, and more, is cutting its revenue growth forecast to as little as 4%, which is half of its original forecast. The company said the second half of September marked a turning point in market conditions, with a deepening global financial crisis directly affecting consumer sentiment.

Despite the tough news, the company still managed to raise its quarterly cash dividend by 1 cent to 59 cents a share.

We had removed shares of VFC from our Recommended List back on Oct. 6, when shares were trading at $72.41. We were concerned that a slowdown was quickly materializing in the retail space, and made a move to downgrade several other retail names, as well.

We like VFC's attractive new dividend yield of 4.03%, based on last night's closing stock price of $58.50. Couple that with a 10 times 2009 earnings valuation, and we're putting this stock on our upgrade watch list.

VF is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars. Genuine Parts Hits Earnings Target, Despite Auto Sector Woes

Genuine Parts ( GPC) reported earnings edged higher as revenue in its electrical and industrial units made up for weaker results in its automotive group.

The company's electrical division sales rose 13% during the quarter, while revenue at Motion Industries, its industrial group, rose 7%. These gains offset the flat results in its automotive and office products group.

We had removed the shares from our "Recommended" list on Oct.2, when shares were trading at $39.75. We think the stock may have a bit more downside, possibly to the low-to-mid $20s area, which is where it bottomed during the last slump. The company currently has an attractive dividend yield of 4.68%, based on last night's closing stock price of $33.33. For now, however, we would look elsewhere for better-positioned companies that will turn around more quickly.

Genuine Parts is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.

Service Revenue Shines, Hardware Slumps in IBM's Third Quarter

IBM ( IBM) saw its third-quarter profit rise 20%, as the company overcame slumping hardware sales by signing a healthy number of new services contracts.

The company derives nearly half of its revenue from annuitylike payments flowing in from contracts it may have inked months or even years ago, for services like consulting and technology outsourcing. Short-term contract signings were up 13% in the quarter to $6.1 billion.

On the flip side, IBM's hardware business saw a nearly 10% drop in sales during the quarter. This drop was offset by its services revenue, which grew 8% to $14.76 billion, as well as its software sales, which jumped 12% to $5.25 billion.

We had removed shares of IBM from our "Recommended" list on Sept.9, when they were trading at $117.29. The company has a below-average dividend yield of 1.75%, based on last night's closing stock price of $91.52. One analyst called the company a "shelter in the storm" -- well, we would prefer our shelter have a much stronger foundation in the form of a larger dividend cushion.

The company is, however, trading at 12 times next year's earnings estimates, which is not so pricey. That said, we will remain on the sidelines as we wait to see if IBM can execute into this last quarter of the year. Hopefully the company will reward shareholders with bigger dividend increases and less of the buyback "magic" that so many companies have been known for recently.

IBM is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.

Zions Bancorp's Bad Loans Begin to Pile Up

Zions Bancorp ( ZION) just reported its third-quarter profit plunged 75%, as the number of loans that were late or unpaid jumped significantly, while the company increased its provisions for covering soured loans.

Nonperforming assets, or loans that were past due, shot up nearly fivefold, to $924.4 million, from $196.6 million last year. The company tripled its provision for loan losses, or money set aside to cover bad loans, to $156.6 million for the 2008 third quarter, from $55.4 million for the 2007 period.

Interestingly enough, ZION's stock has actually held up decently lately, when compared to some its peers. We have avoided the shares since our early June coverage, when the stock was trading at $39.77. The company now has a 4.28% dividend yield, based on last night's closing stock price of $40.20. We are not sure how safe that dividend will be if the loan losses continue to pile up, but the company will likely get a cash infusion from the Treasury's bank infusion program, which could be a big help.

Zions Bancorp is not recommended at this time, holding a Dividend.com Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system.

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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.

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