Starwood Hotels Profit Drops 12% as 2009 Estimates Lowered

Starwood Hotels & Resorts Worldwide ( HOT) just reported a 12% drop in its third-quarter profit.

The company said its revenue from vacation ownership and residential sales declined 11%. Systemwide revenue per available room, or revpar, for same-store hotels in North America dipped 0.5%.

Management warned that 2009 will likely include softening worldwide revpar and continued weakness in its vacation ownership division. The company said it will look to offset some of these factors by lowering vacation ownership, hotel, and corporate overhead costs.

As for the company's outlook, it now sees 2009 profit of about $1.55 per share, which is significantly below analyst expectations of $1.98 per share.

We had removed HOT from our "Recommended" list back on Aug.19, when shares traded at $39.01. The company has a dividend yield of 4.69%, based on last night's closing stock price of $19.20. The stock may see a short-term bottom after its recent 50% drop, but the long-term outlook still puts the stock at 14 times 2009 estimates, with uncertain revenue growth projections. Unfortunately, a cheaper stock price doesn't necessarily mean a solid value at this point. We would look for better risk/reward opportunities elsewhere.

Starwood Hotels is not recommended at this time, holding a Dividend.com Rating of 3.2 out of 5 stars.

Dow Chemical Beats Earnings Estimates, Says Dividend Still 'Safe'

Dow Chemical ( DOW) reported a 6% increase in its third-quarter profits after it implemented substantial price hikes.

The company reported a sales increase of 13% to $15.4 billion and EPS that came in 3 cents ahead of estimates.

Management said its proactive measures, including the implementation of two broad-based price increases and aggressive cost controls, allowed it to post solid results against worsening market conditions, record-high raw material costs and two hurricanes on the U.S. Gulf Coast. Speaking of commodities, the company's costs for raw materials and energy surged 48%, or $2.6 billion more than the same quarter in 2007.

Management believes it can maintain its quarterly dividend that it has paid since 1912.

We had removed the shares of Dow Chemical from our "Recommended" list on Sept. 29, when they traded at $33.97. We were concerned about the huge premium it was paying for Rohm & Haas ( ROH), and felt that would ask as a huge weight to carry for the company and the stock. The company has a 7.60% dividend yield, based on last night's closing stock price of $22.11. We are not sure how the company will be able to sustain its current dividend payout. For now, we will watch the shares closely and let the market give us a sense of whether it buys the company's dividend appeal.

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

Pulte Homes Narrows Losses, but Outlook Still Uncertain

Pulte Homes ( PHM) reported after the bell Wednesday that the company managed to narrow its loss in the third quarter.

The homebuilder saw its revenue plunge, as it booked more charges on land and unsold homes. Overall, revenue fell 37% to $1.6 billion.

Management said that net new orders for the third quarter totaled 3,008 homes, down from 4,582 in the prior-year period. The builder closed 5,377 homes during the quarter, down from 7,468 in the same period last year. The average sales price of Pulte's homes fell 13% to $281,000.

The company did not give earnings guidance for the fourth quarter, citing uncertainty in the overall economy and the housing industry.

We had removed shares from our "Recommended" list on Sept. 17 at $16.23, after being in the stock at the $15.50 level. The company has a 1.61% dividend yield based on last night's closing stock price of $9.95. We are avoiding calling the "Real Estate Bottom," as many have tried to do. Just read the comments and reports, and one can see a bottom is nowhere to be found yet. We would look elsewhere for better investment opportunities.

Pulte Homes is not recommended at this time, holding a Dividend.com Rating of 2.8 out of 5 stars.

Southern's Stock Bounces Despite Slight EPS Miss

Southern ( SO) reported its third-quarter earnings numbers this morning, which came in a touch below estimates.

The power production company had a 2.4% profit increase spurred by higher retail rates and revenue from market-response rates offered to commercial and industrial customers. The company's revenue rose 12.3% to $5.43 billion, even though it missed EPS estimates by a penny.

Management said that despite the challenges of mild weather, a sluggish economy and turmoil in the financial markets, its businesses continued to perform well overall in the third quarter, giving the company positive results and keeping it on track to deliver on its financial and operational goals for the year.

We had recently removed shares of SO from our "Recommended" list on Oct. 14, when they traded at $35.89. The company has a 4.79% dividend yield, based on last night's closing stock price of $33.58. We will be watching the shares closely, as we think the quarter was not as bad as we may have expected. We'll put the stock on our upgrade watch list for a trip back on the "Recommended" list.

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