Ex-Dividend Stocks: Merck, Macy's

NEW YORK ( TheStreet) -- The following stocks go ex-dividend Wednesday, meaning an investor must purchase the shares Tuesday to qualify for the next dividend payment: Merck ( MRK), Macy's ( M), Coca-Cola ( KO), Canadian Natural Resources ( CNQ), Devon Energy ( DVN), Eastman Chemical ( EMN), Family Dollar Stores ( FDO) and Textron ( TXT).

Merck

The drug company is scheduled to report its second-quarter earnings on July 29. Analysts, on average, anticipate earnings of $1.02 a share on revenue of $12.2 billion.

"Merck offers a good mix of low valuation, track record of returning cash to shareholders, and pipeline optionality, in our view," Bank of America Merrill Lynch analysts wrote in a report on Monday. "We also like that MRK's Pharma revenue base is fairly diverse and is supplemented by animal health and consumer businesses, which we see as 'sticky' cash flow streams with growth potential."

Forward Annual Dividend Yield: 4.5%

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Macy's

The retailer reported on May 30 that same-store sales in May rose 4.2%.

"Our meeting with CEO Terry Lundgren and CFO Karen Hoguet increased our confidence that Macy's strong sales momentum will continue throughout 2012 and beyond," Bank of America Merrill Lynch analysts wrote in a June 1 report. "Macy's M.O.M. strategies (My Macy's, Omnichannel and MAGIC selling) should drive market share gains and enable Macy's comps to grow faster than its peers (for more details, see our recent deep dive report). We view the current valuation (5x 2013E EV/EBITDA and 10x 2013E P/E) as inexpensive given Macy's consistent sales performance, substantial earnings leverage, and strong free cash flow generation."

Forward Annual Dividend Yield: 2.2%


Coca-Cola

The soft drinks giant is expected to report second-quarter earnings on July 16. Analysts, on average, expect earnings of $1.20 a share on revenue of $13.03 billion.

"While immediate macro impact of f/x moves and capital structure arbitrage should negatively impact earnings this quarter relative to consensus, we still view Coke as a core holding based on: (i) strong underlying fundamentals; (ii) potential ROIC boost from bottler divestitures and (iii) reasonable relative valuation given likely sales, gross margin and EPS growth acceleration as the year unfolds," Deutsche Bank analysts wrote in a May 28 report. "Maintain Buy, $80 target."

Forward Annual Dividend Yield: 2.8%

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Canadian Natural Resources

The energy company reported first-quarter earnings on May 3 of $427 million, or 39 cents a share, up from year-earlier earnings of $46 million, or 4 cents a share.

"We cut CNQ on our "Future of US oil" thematic (Feb 28), based on its exposure to North American crude pricing distortions and volatility, and its lack of a Mid-Con refining hedge or storage," Deutsche Bank analysts wrote in a May 17 report.

Forward Annual Dividend Yield: 1.5%


Devon Energy

The energy company reported first-quarter earnings on May 2 of $393 million, or 97 cents a share, down from year-earlier earnings of $416 million, or 97 cents a share.

"Devon has successfully completed its strategic repositioning by divesting all offshore and non-North American operations and using a portion of the cash proceeds to repurchase 12% of its shares and expand its large unconventional acreage position," Oppenheimer analysts wrote in a May 25 report. "In the last 18 months, DVN has acquired more than 1.4 million net acres in five onshore US oil and liquids-rich plays. With more than 16 bboe of resource potential, 50% liquids, $7.7B cash and less than 12% debt ratio, DVN has the financial flexibility to fund CAPEX, grow the dividend and repurchase shares. We are lowering our price target from $90 to $75 to reflect the sharp correction in energy equities in the last six months."

Forward Annual Dividend Yield: 1.4%

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Eastman Chemical

The chemical company is scheduled to report second-quarter earnings on July 27. Analysts, on average, anticipate earnings of $1.35 a share on revenue of $1.96 billion.

"We are upgrading Eastman Chemical from Neutral to Overweight," JPMorgan analysts wrote in a May 25 report. "Eastman shares with LYB, DOW and WLK an exposure to an inexpensive and growing natural gas liquids feedstock supply. We expect Eastman to throw off 13.6% of its share price in free cash flow in 2013: its 2012 free cash flow yield is much lower at 4.2% due to increased working capital needs stemming from the Solutia acquisition. We expect a 16% free cash flow yield for 2014. We believe that these very high sustainable levels of free cash flow generation are likely to justify a higher Eastman share price. Eastman Chemical's share price has decreased (15%) over the previous month (comparable to the decrease in LyondellBasell), versus a 6% decrease in the S&P Index. EMN now trades at a 6% discount to its price following the announcement of the Solutia transaction, which is likely to be accretive by $0.55 in 2012 and by an incremental $0.85 in 2013 by our estimates. We lift our December 2012 price target from $57 to $58 because we have also adjusted our earnings estimates upward."

Forward Annual Dividend Yield: 2.4%


Family Dollar Stores

The discount store company is scheduled to report third-quarter earnings on June 28. On average, analysts expect earnings of $1.06 a share on revenue of $2.37 billion.

"Dollar General enjoys a lower priced basket when compared to competitor Family Dollar in each market we surveyed," Deutsche Bank analysts wrote in a June 4 report. "To this end, in Suburban New Jersey, FDO (total basket of $114.24) is only ~1.0% above DG, a relatively flat spread. However, the FDO and DG stores in Metro New York continue to see a much greater difference of 13.4%, which surprisingly, is even greater than the gap we saw (10.7%) in our last study. As zone pricing capabilities at Family Dollar likely play a small role in the discrepancy, the fact that it is 16.3% above market leader Wal-Mart is somewhat surprising, in our view."

Forward Annual Dividend Yield: 1.3%

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Textron

The industrial company is slated to report second-quarter earnings on July 15. Analysts, on average, expect earnings of 44 cents a share on revenue of $2.99 billion.

"We are not yet seeing a robust recovery, although Cessna is still expecting flat / slightly up volumes in 2012," Credit Suisse analysts wrote in a May 22 report. "US customers continue to remain uncertain about placing orders for small-medium sized jets, Europe is 'fairly soft' (as per our trip to EBACE last week) outside of Germany. In emerging markets, Asia demand is 'reasonable', while Latin America is seeing 'good trends.' Pricing remains 'difficult,' and there is limited expectation for an imminent upturn in the backlog. There is 'reasonable growth' in the 25% of sales which is aftermarket. R&D will continue to move up, but as a proportion of sales, the headwind is likely behind us now."

Forward Annual Dividend Yield: 0.4%

-- Written by Alexandra Zendrian

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