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Monday, December 10, 2012

Holiday Stock Picks for 2012

Oracle (ORCL 0.00%, news) this month set a new standard in the race to return cash to shareholders ahead of a possible dividend-tax increase in the new year. The Redwood Shores, Calif., company decided to accelerate its next three dividends -- shelling out a payment of 18 cents a share on Dec. 21, payable to investors of record as of Dec. 14 and representing the scheduled six-cents-a-share dividends for its fiscal second, third and fourth quarters of 2013. In addition to putting its own twist on the corporate trend of beating the tax man with special dividend payments, the move in many ways encapsulates Oracle's transition from an aggressively growing tech titan with a dominant position in enterprise software to a company whose appeal lies largely with value-oriented dividend investors. A number of investors and analysts worry that the world of enterprise software is evolving away from the model ruled by Oracle and a few others, and that the company is lagging in the transition to software and services accessed over the Internet. Oracle has traditionally sold its products to be installed and run on-premises by its business customers. A bubble in dividend stocks? A bubble in dividend stocks? Oracle appears on a daily ranking created with StockScouter, an MSN Money tool that identifies stocks with strong growth prospects in the near term. All stocks with Scouter ratings of 8, 9 or 10 are considered for the list, which is then shortened to exclude stocks with a trading volume below 50,000 shares a day. The remaining stocks are ranked on the basis of market capitalization, sector membership and whether they are growth or value stocks. Best known for its focus on databases, Oracle provides hardware, software and services that businesses use to manage data, foster collaboration, interact with customers and coordinate with suppliers. It entered the hardware business in 2010 with the purchase of Sun Microsystems, one of dozens of deals engineered by CEO Larry Ellison that allowed the company to grow into an indispensable player in enterprise computing. Today, though, a new architecture is gaining traction that is centered upon cloud infrastructure and mobile computing. "The world is moving toward the cloud and Oracle is not completely in sync with that," Piper Jaffray analyst Mark Murphy told The Wall Street Journal after the company posted its fiscal-first-quarter financial results in September. Meanwhile, the accelerated dividend payment will be a boon to Oracle shareholders, none more so than Ellison, who, company officials were careful to point out, had nothing to do with the decision to roll the three dividend payments into one. The move won't cost Oracle anything beyond the roughly $867 million that would be paid as dividends in the remainder of fiscal 2013. Ellison -- Oracle's biggest shareholder, with 1.1 billion shares, according to the company -- would be in line for a dividend of about $199 million. As of mid-September, Oracle had 4.8 billion shares outstanding. Of the 33 analysts covering the company, 16 have a "strong buy" rating on Oracle. Four rate it a "moderate buy" and 13 have a "hold" recommendation. Oracle has a StockScouter rating of 10, meaning it is expected to significantly outperform the market over the next six months with less-than-average risk. StockScouter picks for Dec. 7 Company Sector Dividend yield Forward P/E Scouter score Gilead Sciences (GILD 0.00%, news) Biotechnology N/A 18.3 10 Safeway (SWY 0.00%, news) Supermarkets 3.9% 8.6 10 Symantec (SYMC 0.00%, news) Security software N/A 11.5 10 VeriSign (VRSN 0.00%, news) Internet infrastructure N/A 18.2 10 CA (CA 0.00%, news) Information technology 4.5% 9.1 10 Equity Residential (EQR 0.00%, news) Real estate investments 2.4% 18.3 10 Oracle (ORCL 0.00%, news) Software 0.8% 11.6 10 Yahoo (YHOO 0.00%, news) Internet portal N/A 17.3 10 Viacom (VIAB 0.00%, news) Entertainment, media 2.1% 9.8 9 American International Group (AIG 0.00%, news) Insurance N/A 9.8 9
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