VF Corp. Cuts Outlook but Raises DividendClothing 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.
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. Nobody ever made a dime by panicking, says Jim Cramer. Moneymaking opportunities exist despite the market turmoil. So where's a market master like Cramer putting his money these days? Check out his personal portfolio at Action Alerts PLUS. Take a free trial now.