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Dupont (NYSE:DD) has had a tough few months as the stock has languished as earnings estimates have come down significantly over the last few months and the stock has dropped some 15% from its highs in the summer. However, the second largest chemical company in the world provided positive news yesterday that should arrest the decline in the shares. For income investors, the stock provides a solid 4% yield and a solid probability that it will climb to its recent highs sometime in 2013 implying a total return of around 20% over the next 12 months. Certainly not a home run, but a solid single.

Positives in Dupont's announcement:

  • The company will buy up to $1B in stock in 2013 (Around 2% of float).
  • Stated 2012 EPS will come in at the high end of guidance of $3.25 to $3.30.
  • The company expects sales to increase in the low single digits next year after falling this year

4 reasons DD is a solid income play at just over $44 a share:

  1. The company has an A rated balance sheet and yields 4%.
  2. DD is priced at under 12x forward earnings and analysts expect the company to raise earnings approximately 9% in 2013, not a bad rate of growth for a 4% yielder. The median price target is $50.50 a share.
  3. Dupont owns the largest seed company in the world, Pioneer Hi-Bred. This division accounts for 24% of total revenues and is growing faster than the company overall. It also gets 65% of revenues from overseas.
  4. The stock looks like it is starting to bounce off technical support here (See Chart).

(click to enlarge)

Source: Dupont: A 4% Yielder At An Inflection Point