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 3 stocks with substantial yields, that ultimately, we have rated "Buy." Energy Transfer Partners L.P (NYSE: ETP) shares currently have a dividend yield of 7.60%. Energy Transfer Partners, L.P. engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. The company has a P/E ratio of 10.66. Currently there are 6 analysts that rate Energy Transfer Partners L.P a buy, no analysts rate it a sell, and 8 rate it a hold. The average volume for Energy Transfer Partners L.P has been 1,527,500 shares per day over the past 30 days. Energy Transfer Partners L.P has a market cap of $14.3 billion and is part of the energy industry. Shares are up 10% year to date as of the close of trading on Friday. TheStreet Ratings rates Energy Transfer Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, attractive valuation levels, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- ETP's very impressive revenue growth greatly exceeded the industry average of 3.0%. Since the same quarter one year prior, revenues leaped by 503.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 48.5% when compared to the same quarter one year prior, rising from $206.78 million to $307.00 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ENERGY TRANSFER PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- ENERGY TRANSFER PARTNERS -LP reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ENERGY TRANSFER PARTNERS -LP increased its bottom line by earning $6.74 versus $2.17 in the prior year. For the next year, the market is expecting a contraction of 69.6% in earnings ($2.05 versus $6.74).
- You can view the full Energy Transfer Partners L.P Ratings Report.