spin off

AMERIPRISE FINANCIAL INC. $61 (New York symbol AMP; Conservative Growth Portfolio, Finance sector; Shares outstanding: 235.3 million; Market cap: $14.4 billion; WSSF Rating: Average) provides brokerage, mutual funds and wealth management services to individuals and institutions through over 12,000 advisors. The stock has gained over 60% since its spin-off from American Express, as the strong performance of the stock market in the past two years has boosted assets under management. Ameriprise now trades at 15.6 times the $3.90 a share it’s forecast to make in 2007. The $0.60 dividend yields 1.0%. Ameriprise now aims to focus more on its asset management businesses. That should increase its fee-based income, which provides it with a steady stream of recurring revenues....

NCR CORP. $49.77, New York symbol NCR, has fixed the terms of its planned spin-off of subsidiary Teradata Corp. NCR stockholders will receive a special dividend of one Teradata common share for each NCR share they own. The dividend is a tax-free distribution. NCR stockholders will only have to pay capital gains taxes on Teradata when they sell the stock. Teradata will trade on New York, symbol TDC. The stock will begin trading on a “when issued” basis on September 14. Regular trading begins October 1. Teradata makes computers and software that capture and store large quantities of a business’s data, such as its sales and inventory. Analyzing this data to identify buying habits and trends helps Teradata clients make better decisions and expand profits....

WASHINGTON MUTUAL INC. $35.07, New York symbol WM, bundles its mortgage loans into securities and sells them to other investors. That helps it raise cash to make more loans. However, increasing volatility and rising interest rates in some debt markets are making it harder for Washington Mutual to sell mortgage-backed securities. This lack of liquidity has hurt Washington Mutual’s stock price in the past few weeks. But the company has steadily cut its exposure to the housing market since the start of the year. Cost cuts, growth in its retail banking business and the expansion of its credit card operations cut its reliance on mortgages and should let it keep paying its $2.24 dividend, which provides a 6.4% yield. Washington Mutual is still a buy for long-term gains....

NCR CORP. $52 (New York symbol NCR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 179.9 million; Market cap: $9.4 billion; WSSF Rating: Average) is a leading supplier of ATMs (automated teller machines), cash registers and bar code scanners, mainly to banks and retailers. The company also owns Teradata Data Warehousing, which helps businesses capture and analyze a wide variety of information, such as customer buying habits and inventory management. This information helps clients expand sales and make better decisions. Teradata accounts for roughly 30% of NCR’s total revenue. NCR plans to spin off Teradata as an independent company, probably in the third quarter of 2007. Investors will probably receive one Teradata share for each NCR share they own. NCR stockholders will only have to pay capital gains taxes when they sell their Teradata shares....

IDEARC INC. $36 (New York symbol IAR; Income Portfolio, Consumer sector; Shares outstanding: 146.8 million; Market cap: $5.3 billion; WSSF Rating: Average) publishes over 1,200 yellow and white pages phone directories in 35 states. The company was a wholly owned subsidiary of Verizon Communications Inc. until November 2006. That’s when Verizon handed out its Idearc shares to its own investors as a tax-deferred dividend. Directories are a slow-growing business, but they still generate plenty of steady cash flow. Growing revenue from Idearc’s online properties, including the popular SuperPages.com search site, is helping offset weakness in the print division....

KRAFT FOODS INC. $36 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $57.6 billion; WSSF Rating: Above average) is the world’s second-largest food company, after Nestle. It owns some of the industry’s top brands, including Kraft (cheese), Maxwell House (coffee), Nabisco (biscuits and cookies), Post (cereals) and Oscar Meyer (meats). North America accounts for two-third of its sales. The company was a 100%-owned subsidiary of Altria Group Inc. up to June 2001. That’s when Altria sold about 12% of Kraft’s shares to the public at $31.00 each. Altria handed out its remaining Kraft shares to its own investors in March 2007. Kraft’s sales grew steadily, from $29.7 billion in 2002 to $34.4 billion in 2006. However, profits before unusual items fell from $2.02 a share (total $3.5 billion) in 2002 to $1.87 a share ($3.2 billion) in 2004, mostly due to rising costs. Total earnings were flat at $3.2 billion in 2005 and 2006. But per-share earnings rose to $1.88 in 2005 and to $1.94 in 2006, due to fewer shares outstanding....

To make the most of their asset value, companies may set up a subsidiary as an independent company, then hand out stock in the subsidiary to their own shareholders as a special dividend or spin-off. As a general rule, both the spin-off and its parent do better than comparable stocks for years afterwards. It often takes months or years for the above-average performance to get underway, but not always. One exception is Chipotle Mexican Grill, another is Idearc. Altria began its spin-off of Kraft Foods with a public offering in 2001. The stock stagnated for much of the time since then. But Kraft has strong brands, a steady dividend and a restructuring plan that could invigorate its earnings. A few earnings gains could spur heavy buying by institutional investors. KRAFT FOODS INC. $36 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.6 billion; Market cap: $57.6 billion; WSSF Rating: Above average) is the world’s second-largest food company, after Nestle. It owns some of the industry’s top brands, including Kraft (cheese), Maxwell House (coffee), Nabisco (biscuits and cookies), Post (cereals) and Oscar Meyer (meats). North America accounts for two-third of its sales....

APPLE INC. $124.49, Nasdaq symbol AAPL, hit a new all-time high this week after it confirmed that it will start selling its new iPhone on June 29. The new device combines a mobile phone, a digital music player and a camera. At around $500, the iPhone is more expensive than competing models, but Apple’s marketing skill and reputation for ease of use generally let it charge premium prices for its products. Strong consumer interest should help Apple reach its one-year sales target of 1% of the world mobile phone market. We continue to hold a high opinion of Apple and its products. But its high price in relation to earnings (p/e of 40) and revenue (about $24 a share) limits its appeal right now. Apple is still a hold....

In September 2000, the original Dun & Bradstreet broke itself up into two public companies: Moody’s, and the new Dun & Bradstreet. Unlike a spin-off, where a company hands out shares of a subsidiary to its own stockholders, this break-up created two large firms with well-established brands and clientele. That cut the likelihood investors would sell their new shares. Since the split, Dun & Bradstreet is up 506.3%, while Moody’s has gained 421.4%. We still like both companies, but see only one as a buy right now....

FEDEX CORP. $91.71, New York symbol FDX, fell 9% after it warned that higher fuel costs would cut its earnings in the current quarter to $1.50 a share from earlier forecasts of $1.70 a share. However, in the past FedEx has successfully passed along its higher fuel charges to its customers, and will probably do so again. The stock now trades at just 14.0 times its likely fiscal 2008 earnings of $6.55 a share, which is cheap in light of FedEx’s leading market position and expanding international operations, particularly in Asia. FedEx is a buy....