Friday, September 28, 2012

Added 60 XRX at $7.1/Added 50 FTE at $12.45/Withholding Tax for Recent FTE Dividend

In the last estimate for second quarter GDP, the government now believes that real GDP grew at an annual rate of 1.3% in the 2012 second quarter, down from its second estimate of 1.7%. News Release: Gross Domestic Product

Freddie Mac reported yesterday that the average 15 year mortgage rate was 2.73%.

Fitch downgraded the senior unsecured debt of First Niagara Financial Group to BBB- from BBB. The FNFG equity preferred stock was downgraded to B from B+. TEXT-Fitch This is just more fallout out from the boneheaded decision to acquire the HSBC branches for close to $1B in cash. First Niagara: Just Another Incompetent Bank Board of DirectorsFirst Niagara Dividend Slash

American Crossroads, a super PAC launched by Karl Rove, is simply incapable of being truthful in its advertisements. examines a recent fraudulent ad from this PAC which raises the "death panel" claim again. (see PolitiFact | American Crossroads's file for false claims). Disgusting is the appropriate characterization of that organization.

Another "conservative" PAC, which calls itself "Government is Not God",  apparently does not believe that telling the truth is a Christian or conservative value. PolitiFact | Government is Not God PAC's file
Calling this PAC disgusting does not do it justice. 

1. Added 60 Xerox at $7.1 Last Wednesday (The $500 to $1,000 Flyers Basket Strategy)(see Disclaimer): I am giving Xerox a promotion from the Lottery Ticket Basket Strategy to The $500 to $1,000 Flyers Basket Strategy.

I had bought 40 XRX shares at $7.55 in the LT category which have now been taken out of that category. Bought 40 XRX at 7.55 as LT That re-categorization results in 100 shares held in The $500 to $1,000 Flyers Basket Strategy which is viewed here at HQ as a less risky category than LTs. I frequently control risk by the amount of my investment.     

This re-classification is based on the following factors. The recent slide in Xerox's price to $7 improves the valuation metrics and significantly reduces the risk in my opinion. These metrics include the following, calculated based on a $7.15 price, with current analyst estimates and earnings data though 6/30/12:   

Trailing P/E: 7.9
Forward P/E: 6.11
Price to Sales: .42
Price to Book: .79
Return on Equity: 10.04%
Dividend Yield: 2.38% ($.17 per share annually)

Xerox was ex dividend on the date of my 60 share purchase. 

The current consensus E.P.S. estimate is $1.08 in 2012 and $1.17 in 2013. 

Xerox Profile Page at Reuters

Xerox Key Developments Page at Reuters

For the first 2012 quarter, Xerox reported adjusted E.P.S. of 23 cents on $5.5B in revenues. SEC Filed Press Release The company reported that services exceeded more than 1/2 of revenues. Total company revenue increased 2% on a constant currency basis, while services revenue increased by 10% in constant currency.  

For the second 2012 quarter, Xerox reported an adjusted E.P.S. of 26 cents which excluded 4 cents related to the amortization of intangibles. Registrant's second quarter 2012 earnings press release dated July 20, 2012 Revenues were reported at $5.5B, up just 1% on a constant currency basis. Services revenue increased by 7% in constant currency. The company guided 2012 adjusted earnings to a range between $1.07-$1.12.

Morningstar currently has a 5 star rating on XRX, with a FV estimate of $11 and a consider to buy at $7.7 or below.

Taking the cost of the 40 XRX shares out of the LT strategy reduces my exposure to $8,819.95 in 41 stocks and increases my buying capacity to $2,373.02 based on the current realized gains of $11,192.97. 
2. Added 50 FTE at $12.45 Last Monday (see Disclaimer):  Recently, I sold 105+ shares of FTE. Item # 2 Sold 105+FTE at $13.4 I noted then that I would consider buying back those shares at less than $12.5. Instead of buying back the entire 100 share lot, I decided to buy 50 at $12.45 and buy another $50 at less than $11.5.

This last 50 share purchase brings me up to 150 shares. I re-initiated a position with a 100 share purchase last March: Bought Back 100 FTE at $14.82 

I will only buy FTE shares in my Fidelity or Vanguard brokerage accounts. Item # 2 FTE Dividend-Withholding Tax; Item # 3 Schwab Response on FTE Withholding Tax Those were the only two brokerage firms, used by me, that applied for "relief at source" with France's tax authority. That effort reduced my tax withholding from 30% to 15%. Schwab, Ameritrade and Sharebuilder did not apply for relief at source, and France required FTE to withhold 30% from the last dividend payment.

I received yesterday in my Fidelity account the second installment of FTE's 2012 dividend. As shown in this snapshot, I paid a 15% withholding tax ($11.22 on $74.8):

Fidelity 15%  FTE Tax Withholding +$2.50 Fee ($.50 is for relief at source fee)

Part of the $2.5 fee would be a $.50 fee connected with the "relief at source" filing for 100 shares.

The fee for "relief at source" was raised from $.004 per ADR share, applicable for the last FTE dividend, to $.005 for the most recent FTE dividend. ‎ The total cost for obtaining that relief would be 50 cents, which is charged back to me by Fidelity. That filing reduces my tax rate to 15% from 30%.

I can confirm that Vanguard withheld 15%, while Schwab and T.D. Ameritrade withheld 30%. All four firms withheld a $2 ADR fee on 100 shares.

This is a snapshot taken from a Schwab account:

SCHWAB 30% FTE Tax Withholding + $2 FEE
In addition to the 50 shares last Monday, I also own 100 shares: Bought Back 100 FTE at $14.82 Those shares have generated two dividend payments. 

I had profitably exited small positions at higher prices: Sold: 50 FTE at $21.75 (September 2010); Sold:  50 FTE @ $23.18 (December 2010); Sold 50 FTE AT $22.27 (Feb. 2011).

I am now back to a 150 FTE share position with a much lower total average cost per share ($14.14). 

At the $12.45 price, the current analyst consensus estimates, and earnings data through 6/30/12, some of the FTE key statistics are as follows: 

Forward P/E: 7.36
Price to Sales: .58
Price to Book: .94
Return on Equity: 12.3% 

France Telecom Profile Page at Reuters

France Telecom Key Developments Page at Reuters

FTE has a 5 star rating from Morningstar with a FV estimate of $23 and a consider to buy target at $16.1 or lower. S & P currently has this stock rated at 4 stars with a $16 twelve month target price.

The primary problem is new wireless price competition in France due in large part to the market entry of Iliad, which is causing a double whammy for FTE, reflected in lost customers and lower prices to meet competition.

FTE Stock Quote
FTE: 12.59 +0.07 (+0.56%) 

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