Today’s stock review is Xerox Corporation (XRX) which was recently upgraded to 4 stars from Standard&Poors (the S&P report isn’t updated yet). XRX was upgraded from 3 to 4 stars yesterday because of “valuation” but the real reason it was upgraded, in my opinion, was yesterday’s news that it would start paying dividends again. Words like “dividends” and “valuation” make my mouth water but I still have to do my due diligence to see if this is a stock worth owning.
The monthly chart shows XRX’s price above its 50 month moving average, trading at $16.08 (yesterday’s close) up from an intramonth low of $4.50 back in late 2002. The chart is in a uptrend, which is good, and it looks like XRX has pulled back. It’s too early to tell if the trend is breaking because of global economic pressures but it sure looks like its bouncing off that invisible trendline. I’d consider entering if XRX’s price keeps treading higher till the end of the month.
Everyone got excited yesterday after XRX's announcement that it would pay shareholders of record on 12/31 a dividend of $4.25. I'm assuming that's for the entire year which makes it an approximate dividend yield of 26.4%. The announcement also indicated that it expects its earnings to grow to a range of $1.31 to $1.35 next year, up from $1.01 this year. Its current PE ratio is 15.9, ROA is 3.8%, ROE 12.2%, Gross Margin 40.5%, Net Proft 5.8%, and Book Value/share is $8.50. Overall the fundamentals are ok and without the dividend announcement I'd completely ignore XRX, with the announcement and better outlook I'm considering adding XRX to my portfolio.
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