While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 5 stocks with substantial yields, that ultimately, we have rated "Buy." Terra Nitrogen Company L.P (NYSE: TNH) shares currently have a dividend yield of 7.40%. Terra Nitrogen Company, L.P. engages in the production and sale of nitrogen fertilizer products. It primarily offers anhydrous ammonia and urea ammonium nitrate solutions. Terra Nitrogen GP Inc. serves as the general partner of the company. Terra Nitrogen Company, L.P. The company has a P/E ratio of 11.49. The average volume for Terra Nitrogen Company L.P has been 20,800 shares per day over the past 30 days. Terra Nitrogen Company L.P has a market cap of $3.6 billion and is part of the chemicals industry. Shares are down 7.7% year to date as of the close of trading on Thursday. TheStreet Ratings rates Terra Nitrogen Company L.P as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- TERRA NITROGEN CO -LP has improved earnings per share by 19.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, TERRA NITROGEN CO -LP increased its bottom line by earning $17.06 versus $15.33 in the prior year.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Chemicals industry average. The net income increased by 15.6% when compared to the same quarter one year prior, going from $129.80 million to $150.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 2.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- TNH has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.14, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Chemicals industry and the overall market, TERRA NITROGEN CO -LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full Terra Nitrogen Company L.P Ratings Report.
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