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." Sturm Ruger & Company (NYSE: RGR) shares currently have a dividend yield of 4.80%. Sturm, Ruger & Company, Inc. engages in the design, manufacture, and sale of firearms in the United States. The company offers single-shot, auto loading, bolt-action, and sporting rifles; single-action and double-action revolvers; and rim fire auto loading and center fire auto loading pistols. The company has a P/E ratio of 11.45. The average volume for Sturm Ruger & Company has been 314,600 shares per day over the past 30 days. Sturm Ruger & Company has a market cap of $1.0 billion and is part of the aerospace/defense industry. Shares are up 19% year to date as of the close of trading on Monday. TheStreet Ratings rates Sturm Ruger & Company as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- RGR's very impressive revenue growth greatly exceeded the industry average of 5.6%. Since the same quarter one year prior, revenues leaped by 50.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- RGR 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 the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.48, which illustrates the ability to avoid short-term cash problems.
- 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 Leisure Equipment & Products industry and the overall market, STURM RUGER & CO INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 42.14% is the gross profit margin for STURM RUGER & CO INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.99% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 151.75% to $39.43 million when compared to the same quarter last year. In addition, STURM RUGER & CO INC has also vastly surpassed the industry average cash flow growth rate of 18.32%.
- You can view the full Sturm Ruger & Company Ratings Report.
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
Check Out Our Best Services for Investors
Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
Every recommendation goes through 3 layers of intense scrutinyquantitative, fundamental and technical analysisto maximize profit potential and minimize risk.
Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.