Look at Dover Corp (DOV)’s Communication Technology Spinoff

Ingersoll-Rand is trading at $61.10 per share, with the total market cap of $18.40 billion. The market values Ingersoll-Rand the most expensive, at 11.38 times its trailing EBITDA.

Ingersoll-Rand PLC (NYSE:IR) also plans to spin off its commercial and residential security business, Allegion. At spinoff, Allegion will raise initial debt to pay one-time dividend to Ingersoll Rand.

For the full year 2013, Ingersoll-Rand expects to generate around $14.2 to $14.4 billion in revenue, with the small growth of 1%-3%. The company thought that the slow growth might happen for most end markets in 2013. The continuing EPS might come in at around $2.75 – $2.95 per share, with the full-year cash flow of $1.1 billion, excluding the impact of security spinoff/restructuring. At the current trading price, investors get around 1.40% dividend yield.

Weatherford International Ltd (NYSE:WFT) has the lowest EBITDA multiple among the three companies. At $13.80 per share, Weatherford is worth around $10.60 billion on the market. The market values Weatherford at 8.16 times its trailing EBITDA.

With the rising global oil activities, Weatherford has planned to increase its investments in unconventional activities including tight oil/gas, oil sands and shale, from 13% in 2003 to 39% of the total spending in 2017. The total spending amount might reach as much as $137 billion in unconventional energy in 2017. Weatherford targeted to reduce its capital expenditure from 10%-15% to around 8%-10% of the total revenue. For the full year 2013, it expects to deliver double-digit growth in its top line.

My Foolish take

The spinoff of consumer communication technology business will allow Dover to focus on its industrial segment, unlocking potential value for its shareholders. Income investors might find Dover as a safe place to invest for dividends due to its great historical dividend payment record. Knowles could be interesting too, with the market leading position, a $1.3 billion in revenue and $320 million in operating EBITDA. However, spinoff investors might wait for the trading price of Knowles to determine its attractiveness level.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article A Closer Look at Dover’s Communication Technology Spinoff originally appeared on Fool.com is written by Anh HOANG.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.