The Next Dividend Stock to Get Bought Out

Last Friday, The Wall Street Journal reported that InBev would be upping its buyout offer for Anheuser-Busch by another $5 a share. On a day when the S&P 500 lost ground, shares of BUD shot up about 8.6%.

Then, yesterday, it became official. The two companies announced a friendly merger worth $52 billion.

No doubt a lot of U.S. citizens are uncomfortable with such an iconic American brand getting bought by a foreign firm, and I understand where they’re coming from.

At the same time, this deal is in the best interest of BUD shareholders, who will get a windfall and a quick, guaranteed return on their investment. In fact, I sure hope you listened to what I said back in late May:

“If you don’t yet own the stock, a $46-billion buyout implies an acquisition price of $65 a share. That represents another 14.8% gain from BUD’s closing price before the Memorial Day holiday. Should this deal end up happening, even new investors stand to reap plenty of profits.”

Heck, based on the increased offer, Bud’s shares are now trading around $67, up about 17% from May 27. That’s a tidy little gain in a matter of a few weeks, and it’s a spectacular return given the overall market’s nosedive over the same period.

Of course, the Bud deal wasn’t even the biggest merger news we got last week. Amazingly enough …

Yet ANOTHER of My Favorite Dividend Companies
Announced It Was Getting Bought Out at a Huge Premium!

First, Mars announced it was buying Wrigley, which I covered right here back on May 6. Then we got rumors about the aforementioned InBev/Anheuser-Bush.

Now, the latest breaking story: Dow Chemical said it was acquiring Rohm & Haas at a huge premium. ROH shares shot up 64% when the news hit the wires! Wow!

Even more unbelievable is the fact that all three of these acquisition targets were profiled in my special report, “Seven Stocks to Triple Your Income Over Time.”

I knew these companies were undervalued. And I was sure their long histories of steady dividend payments made them attractive income stocks. But never in my wildest dreams did I expect three of the seven recommendations to become acquisition targets within months of each other!

It just goes to show you that despite all the bad news coming across the tape, there are rays of sunshine if you know where to look.

It also proves that many well-known, dividend-paying stocks remain attractive — not just for their income potential — but also because of their stable businesses and hidden value.

Just look at Rohm & Haas a little more closely and you’ll see what I mean.

The company has been producing chemicals since 1909, and its products include:

Coatings such as polymers and resins that are used for paint, ink, paper, and textiles.
Performance chemicals, which find their way into plastics, household cleaning & personal care products, water treatments, and foods.
Materials used in electronics products.

Rohm & Haas investors watched mounds of salt turn into mounds of money!

And get this … the company also boasts a major salt business! Yes, I’m talking about everything from the white crystals on your table (Rohm & Haas owns Morton, the #1 table salt brand in the U.S.) to the version that’s used to de-ice roadways.

Hardly exciting, right? Still …

Companies With Large, Diverse,
Even Boring Businesses
Are In Demand Right Now!

Clearly, Rohm & Haas isn’t a blockbuster growth stock. Its revenues have been rising about 5% a year.

However, the company is a steady earner. Per-share earnings went from $0.98 in 2002 … to $2.21 in 2004 … $3.41 in 2006 … and should come in at $3.80 for all of this year.

A lot of investors were steering clear of the chemicals industry because of rising raw material and energy costs. However, as I pointed out all along, Rohm & Haas has 100 YEARS of experience in this industry. Companies that have survived a century of ups and downs are very likely to survive another 20 business cycles, as far as I’m concerned.

Another way to look at it: ROH initiated its first dividend back in 1927, and has been hiking the payment ever since. In fact, on May 7, it boosted its payment another 12%. When companies can raise their dividends through thick and thin, it’s a great sign that their underlying businesses are still performing well.

Companies like Dow Chemical aren’t stupid. Nor are the big investors backing these buyout deals. (And I should note that, yet again, Warren Buffett is involved with this one!) They know good deals when they see them. And they don’t mind buying when there’s blood in the streets.

I suggest you follow the same approach in your personal portfolio. Not only will you secure some very attractive dividend yields, but you might even wake up to a one-day gain of 64%.

Best wishes,

Nilus

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