The Mission Report

The MissionIR Report - April 2011

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Company Updates


Dividends Make a Strong Comeback in 2011

Big companies increased their dividends by a record amount in the first quarter. Since the start of the year, 117 companies in the Standard & Poor's 500 index said they would raise or start paying dividends. The value of the new and raised annual dividends announced by these companies amounted to a record $16.6 billion, according to Howard Silverblatt, senior index analyst at S&P.

The surge in dividends reflects a turning point in the long recovery from the financial meltdown in 2008. After the meltdown many companies slashed or eliminated their dividends and, like many Americans, put their cash in the bank and sat on it. As a result, U.S. companies have amassed a record $940 billion in cash.

But now the economy is recovering, profits are rising and investors are demanding something for their patience. An easy way to keep shareholders happy is to restore or raise dividends. JPMorgan Chase & Co. is quintupling its annual dividend from 20 cents a share to $1, amounting to an increase of $3.1 billion. The value of the payout is a record for an S&P 500 company.

Even companies that have long resisted dividends are instituting them. Cisco Systems Inc. said it would begin paying shareholders $1.3 billion per year, a record amount for a first-time dividend payer in the S&P 500.

"The fact that dividends are increasing is a clear signal that the economy and businesses worldwide are on a much firmer footing than a few years ago," said Kent Croft, the manager of the $421 million Croft Value Fund.

However, a strong recovery in dividends hasn't made up for all the losses the previous three years. Even with the increases, quarterly dividends by companies in the S&P 500 are 13 percent lower than their peak in 2008.

Some companies that have raised their dividend still pay far less than before the recession. That is particularly true for banks and other financial services companies. Their dividend yield, which measures how much cash is being paid per share, runs around 1.41 percent today, far below the 3.32 percent yield in 2007.

JPMorgan's annual dividend is still well below the $1.52 a share it paid in 2008.

Citigroup will pay just 4 cents a year, the maximum federal regulators are allowing the bank to pay under the provisions of its bailout package. Citigroup had paid as much as $2.16 per share before the financial crisis.

Bank of America Corp. wasn't given the OK by the Fed to raise its dividend, which is also just 4 cents per share. At its peak in 2008, the company paid annual dividends of $2.56 per share.

"Companies are paying more dividends, but they are also taking it slow," Silverblatt says. "Dividends are far from being completely back."

30-Year Fixed-Rate Mortgage Continue to Rise

Rates on the 30-year fixed-rate mortgage rose for the second week in a row, averaging 4.86% for the week ending March 31, up from 4.81% a week prior, according to Freddie Mac's weekly survey of conforming mortgage rates. The mortgage averaged 5.08% a year ago.

Fifteen-year fixed-rate mortgages averaged 4.09%, up from 4.04% last week. The mortgage averaged 4.39% a year ago.

Rates on adjustable-rate mortgages also rose, with the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaging 3.7%, up from 3.62% last week; the ARM averaged 4.1% a year ago. And the 1-year Treasury-indexed ARM averaged 3.26% this week, up from 3.21% last week; the ARM averaged 4.05% a year ago.

To obtain the rates, the fixed-rate mortgages and the 5-year ARM required payment of an average 0.7 point, while the 1-year ARM required payment of an average 0.6 point. A point is 1% of the mortgage amount, charged in prepaid interest.

While rates are up for the second week in a row, they continue to remain low, said Frank Nothaft, vice president and chief economist, Freddie Mac, in a recent news release.

"Low rates have benefited from relatively benign inflation reports. Inflation as measured by the 12-month growth in the core price index for consumer spending, a metric preferred by the Federal Reserve, is hovering near the lowest pace since 1960 when this data series began," he said.

But distressed home sales are continuing to affect home prices, he added.

"In January, these homes accounted for 37% of existing home sales and rose to 39% in February, based on figures from the National Association of Realtors. House prices were down 3.1% in January from the same month last year according to the S&P/Case-Shiller Home Price Indices," he said.

Home prices fell 3.1% year over year in January, down from a 2.4% year-over-year drop in December.

Analysts don't see any near-term shift in the downward momentum in home prices. Housing-market data continued to be poor in February, as both existing- and new-home sales plunged.

However, some economists see a light at the end of the tunnel. They believe that sales may pick up in the spring if buyers become convinced that mortgage rates are likely to rise, given talk of a Federal Reserve exit from its ultra-easy monetary policy.

U.S. Auto Sales Up 17% in March

Powered by an improving economy, U.S. auto sales rose 16.9% in March with Chrysler Group LLC, Nissan Motor Co. and Ford Motor Co. leading the industry's gains.

Chrysler reported sales of 121,730 cars and light trucks in March, an increase of 31% from a year ago and its highest monthly total in nearly three years. Nissan nearly matched Chrysler's total, selling 121,141 new vehicles, thanks to heavy incentives.

Ford sales jumped 19% to 212,295, enough to put its monthly total ahead of bigger rival General Motors Co. for only the second time since 1998. GM's sales increased 10% to 206,621. General Motors pulled back from high sales incentives offered at the beginning of 2011, dampening the month's sales.

Ford edged ahead of GM with the help of expanded sales to fleet customers including government agencies and rental-car companies. GM exceeded Ford in retail sales to individual consumers who buy cars and trucks from dealers.

Toyota Motor Co. suffered a decline in March sales, the only major auto maker to do so, on weaker truck sales.

Amid rising gasoline prices, Americans have again started buying more small cars and fewer large trucks.

Ford's sales of full-size pickup trucks to consumers declined, Ford sales chief Ken Czubay said in a conference call Friday. "It is something we are keeping our eye on," he said.

Trucks made up 47.5% of all light vehicles sold, and cars 52.5%, Autodata said. A few months ago, the ratios were reversed.

Ford said the truck decline is similar to the slump in truck sales in 2008 that was sparked by rising gas prices. This time, however, softer sales of pickups to consumers have been partially masked and offset by higher truck sales to fleet buyers including corporations and large construction companies.

Ford will idle a truck plant in Louisville, Ky., next week because of softer demand. The company is also concerned about a possible parts shortage due to the earthquake in Japan. A plant in Flat Rock, Mich., that makes the Ford Mustang will shut down next week because of excess inventories of that model.

Overall, U.S. demand for autos seems to be moving steadily higher, following another drop in unemployment and further rises in corporate profits, Don Johnson, GM's top sales analyst, said.

"We are starting to see a shift to compact cars but consumers are not delaying purchases," he said. "That's really good news."

Broadwind Energy, Inc. (BWEN)

Broadwind Energy, Inc. announced that it has strengthened its Board of Directors with the election of Thomas A. Wagner. Thomas brings with him a diverse background in the energy industry, including more than 30 years with GE Energy in various engineering leadership positions in developing, delivering and servicing nuclear plants, gas turbines, wind turbines and generators. As GE Wind's general manager of engineering, Thomas was instrumental in developing the reliability programs and product improvement plans for the GE 1.5 MW turbine.

"I am delighted that Thomas Wagner has joined Broadwind's Board of Directors," stated Peter C. Duprey, president and CEO of Broadwind Energy. "Tom has significant experience in the wind energy and gas turbine business. His demonstrated technology leadership in the development, delivery and service of world class engineered energy products will be especially beneficial as Broadwind continues to execute on our strategy to provide integrated solutions to energy and infrastructure customers to help them build their businesses better."

About Broadwind Energy, Inc. (BWEN)

Broadwind Energy, Inc. applies decades of industrial expertise to innovate integrated solutions for the energy and infrastructure markets. Although the company's offerings include products for the mining and oil & gas industries, its primary focus is on the burgeoning wind energy industry. With facilities throughout the U.S., Broadwind Energy is committed to helping its customers maximize the performance of their investments.

Growth in the U.S. wind energy market is being driven by multiple macroeconomic factors, including an economic recovery and increased demand for electricity, rising energy prices and wind development incentives provided by the government. The maturation of technologies and services within the wind industry, including increased turbine efficiencies and improved equipment maintenance and reliability, is also increasing market demand.

Leveraging a team of experts, a diversified product and services offering, and the capacity to achieve long-term growth and value, the company has secured a solid presence in the North American wind energy market. Broadwind Energy intends to increase capacity utilization and invest in its service business to ensure that ongoing market demands are met.

CAMAC Energy, Inc. (CAK)

In 2010, CAMAC Energy Inc. transitioned from a development stage oil and gas company to an oil producing and revenue generating entity. The recent acquisition of Oil Mining Leases 120 and 121 in Nigeria enables the company to move forward to the next phase of its growth strategy. CAMAC Energy is currently focused on identifying the best way to accelerate monetization of those leases with its partner, as the company eagerly awaits testing of the deeper and more prolific Miocene targets.

The OML 120 block is located directly east of OML 133, which contains the giant 500 million barrel Erha Field, and north of OML 121, where Allied Energy Plc detected signs of potential gas resources in preliminary drilling results. Based on available information, CAMAC Energy believes the OML 120/121 blocks may potentially hold over 500 million barrels of recoverable oil resources.

About CAMAC Energy, Inc. (CAK)

CAMAC Energy, Inc. is a dynamic, independent energy company that targets high return, early cash flow global energy projects. Maintaining a balanced portfolio which includes upstream operations and downstream opportunities in Asia and West Africa, the company is committed to building success through strategic vision, extensive experience, and responsible corporate governance.

Through a comprehensive business strategy, CAMAC Energy utilizes internal experience and its unique positioning to identify and target high-return investments in the global energy industry. The company actively manages investments and on-going operations by limiting capital exposure and forming strategic partnerships and alliances.

CAMAC Energy's principal assets include interests in the Oyo Oilfield, an offshore oil asset in deepwater Nigeria that started production in December 2009, and a 100% interest in the Zijinshan CBM gas asset located in the Shanxi Province, China. The company also operates an Enhanced Oil Recovery and Production (EORP) business in Northern China.

The senior management team has extensive experience in the fields of international business development, geology, petroleum engineering, strategy, government relations, and finance. Members of the company's management team previously held positions in oil and gas development and screening roles with domestic and international energy companies.

Echo Therapeutics, Inc. (ECTE)

In 2010, Echo Therapeutics made significant progress with all of its key programs and achieved important milestones, including the successful submission of a 510(k) premarket notification to the United States Food and Drug Administration (FDA) for its Prelude device to enhance the delivery of 4% topical lidocaine cream. The company was also able to raise capital for the funding of operations through final development.

Echo Therapeutics anticipates listing on a national exchange in the near-term, allowing it to maximize its outreach to a new, untapped investor base. The company's main goals for the year include gaining product clearance for its Prelude System and aggressively advancing the clinical development of its Symphony system, clearing the path for an application to the FDA for marketing clearance.

About Echo Therapeutics, Inc. (ECTE)

Echo Therapeutics, Inc. is developing the Symphony tCGM System as a non-invasive, wireless, transdermal continuous glucose monitoring system for patients with diabetes and for use in hospital critical care units. Echo is also developing its needle-free Prelude SkinPrep System as a platform technology for enhanced skin permeation for delivery of topical pharmaceuticals.

All existing FDA-approved continuous glucose monitoring systems are needle-based, requiring insertion of a glucose sensor into the patient's skin. Not only does this cause discomfort, but it also gives rise to risks of infection, inflammation or bleeding at the insertion site. Echo Therapeutics' Symphony tCGM does not require insertion of its glucose sensor, eliminating the risks and discomfort associated with needle-based CGM systems.

The Prelude SkinPrep System incorporates Echo Therapeutics' patented skin permeation control technology into a comfortable, hand-held device that increases the permeability of the skin allowing for analyte extraction and drug delivery. The key feature of the company's skin permeation technology is its feedback control algorithm used to achieve optimal and pain-free skin preparation for transdermal sensing technologies.


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