The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.By Lisa Springer NEW YORK ( StreetAuthority) -- Last year was a record year for spinoffs, with deals worth an estimated $116 billion completed. There are even more expected in 2012. Spinoffs occur when companies want to shed units that are performing poorly, undervalued or unrelated to the main business. Instead of selling to a rival, companies can make a tax-free distribution of the business to investors that often increase shareholder value. In return, the new company is often able to innovate and grow, leading to better returns for shareholders. Unlike IPOs, which get lots of media attention, spinoffs often fly under the radar. This means investors can buy shares before the spinoff is well-known and often lock in above-average yields.
Abbott has a 22-year history of dividend growth. The last increase was 9% last May to a $1.92 annual rate. The company is guiding for 2012 earnings that will exceed $5 a share and provide better than two-fold coverage of the dividend. Both Abbott and Abbvie will pay a dividend, with payout being split between the two.
D.E. Master Blenders will trade on the New York Stock Exchange and be headquartered in Amsterdam. The business generated operating income (before corporate overhead) of $452 million last year, and analysts think the standalone business will easily produce more than $380 million of income this year. D.E. Master Blenders and Sara Lee will pay dividends and have investment-grade credit ratings. Sara Lee has a 65-year track record of paying dividends, but recent dividend growth has been weak at just 1% a year. Risks to consider: ConocoPhillips bases its income projections on "flat" gas prices and in the short-term will be partially funding the dividend from cash on hand and asset sales. This limits future flexibility and means a dip in oil prices could hurt the dividend. In addition, while both Sara Lee businesses will pay a dividend, the company hasn't disclosed initial rates, payout targets or dividend growth policy. Action to take--> My top pick is ConocoPhillips because of the company's excellent dividend track record and transparent plan for future dividend growth. Abbott is also a strong choice for dividend investors who want a safe payout and steady growth. Sara Lee is appealing as a value play with modest income growth. >>To see these stocks in action, visit the 3 Upcoming Spinoffs Could Pay Huge Dividends portfolio on Stockpickr. Also see:
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