On the other side, AT&T’s Project VIP is on track. Under the plan the company recently entered into two deals of ~$2.68 billion. The first one being AT&T’s acquisition of Atlantic Tele-Network’s Alltel wireless business for ~$780 million. Alltel will bring in ~585,000 new customers to the company. The second deal comprises of the company’s acquisition of 700MHz B block spectrum from Verizon Wireless. This spectrum covers ~42 million people in 18 states and further helps in reducing the gap between AT&T and Verizon. The company will pay ~$1.9 billion in cash and the AWS contributions from five markets for the deal. Both these deals are complementary to AT&T’s existing 700 MHz B and C block holdings. With this spectrum AT&T will be able to deploy a 10×10 MHz LTE (B&C combined) network in a larger footprint. The company can enter into more of such deals in the future also as the capex for 2013 is expected to be ~$21 billion along with the free cash flow of ~$14 billion. The buyback of the remaining 230 million shares under its 300 million share buyback plan will complete by the mid of 2013 which will help offset the anticipated low margins during the year.
Southern Copper
Latin American Basic Materials sector remains a challenge for investors as China’s demand growth has slowed down. But copper ore has relatively less exposure to the Chinese construction market than other materials such as Iron ore, making it the preferred pick from the market. Around 9% of Latin American copper is used in the Chinese market as compared to ~50% of steel manufactured. Southern Copper Corporation is a prominent player in the region for copper and an anticipated scarcity will arise when Freeport-McMoRan diversifies into energy and shifts its focus away from copper.
The company’s primary strength lies in the classic Tier 1 mines with cheap growth potential andminimum capital requirements. The company operates four main mines, two in Mexico and two in Peru. These mines are large-scale, open-pit mines and have an average lifespan of 110 years. Its current capacity is ~620 kt per year, but through expansion plans, by 2015, the company will grow to over ~1mt. The largest growth potential is at the Buenavista mine in Mexico which has ~40% of the total reserves of the company. By the mid of 2013, the company will start a brown field mine at Buenavista with capacity of ~120 kt. Another added advantage of these mines is the low capitalrequirement. The new brown field mine would demand ~$3700/ton in form of capex. This is way less than its competitors in the region which require ~$11000/ton. The future expansion plans and the low-cost of production will help in the growth of this stock. However, one short-term risk for the company is the labor contracts in Peru which would be renegotiated in 2013.
Conclusion
The Increased Natural gas and electricity rates of PPL’s subsidiaries, its hedged output and consistent performance of the UK region shall drive the growth of the stock in the future. On the other hand, the decent guidance and expansions via Project VIP will help AT&T increase its customer base and strengthen the stock’s performance. Last, but not the least Southern Copper’s strong mine base and expansion plans opens another investing opportunity.
The article Three Dividend Stocks You Must Buy originally appeared on Fool.com and is written by Madhu Dube.
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