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." Starwood Property (NYSE: STWD) shares currently have a dividend yield of 6.20%. Starwood Property Trust, Inc. engages in originating, investing in, financing, and managing commercial mortgage loans, other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments. The company has a P/E ratio of 16.20. Currently there are 4 analysts that rate Starwood Property a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Starwood Property has been 1,276,000 shares per day over the past 30 days. Starwood Property has a market cap of $3.9 billion and is part of the real estate industry. Shares are up 23.1% year to date as of the close of trading on Monday. TheStreet Ratings rates Starwood Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, good cash flow from operations and expanding profit margins. 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:
- The revenue growth greatly exceeded the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 47.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, STWD's share price has jumped by 35.90%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, STWD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 37.3% when compared to the same quarter one year prior, rising from $41.03 million to $56.33 million.
- Net operating cash flow has significantly increased by 308.55% to $34.13 million when compared to the same quarter last year. In addition, STARWOOD PROPERTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of 32.95%.
- STARWOOD PROPERTY TRUST INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.78 versus $1.41 in the prior year. This year, the market expects an improvement in earnings ($1.95 versus $1.78).
- You can view the full Starwood Property Ratings Report.
- Compared to its closing price of one year ago, DIN's share price has jumped by 34.73%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DIN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for DINEEQUITY INC is rather high; currently it is at 59.50%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.86% trails the industry average.
- The revenue fell significantly faster than the industry average of 2.8%. Since the same quarter one year prior, revenues fell by 34.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, DINEEQUITY INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full DineEquity Ratings Report.
- RDS.A's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RDS.A's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 2.6% when compared to the same quarter one year prior, going from $6,500.00 million to $6,671.00 million.
- Net operating cash flow has significantly increased by 53.33% to $9,913.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 28.97%.
- You can view the full Royal Dutch Shell Ratings Report.
- Our dividend calendar.