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." Great Northern Iron Ore (NYSE: GNI) shares currently have a dividend yield of 11.30%. Great Northern Iron Ore Properties, a conventional nonvoting trust, owns and leases mineral and non-mineral properties on the Mesabi Iron Range in northeastern Minnesota. The company has a P/E ratio of 5.94. The average volume for Great Northern Iron Ore has been 22,800 shares per day over the past 30 days. Great Northern Iron Ore has a market cap of $119.3 million and is part of the metals & mining industry. Shares are up 19.7% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Great Northern Iron Ore as a buy. Highlights from the ratings report include:
- The revenue fell significantly faster than the industry average of 6.5%. Since the same quarter one year prior, revenues fell by 44.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 51.0% when compared to the same quarter one year ago, falling from $7.24 million to $3.55 million.
- The share price of GREAT NORTHERN IRON ORE PPTY has not done very well: it is down 19.73% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- GREAT NORTHERN IRON ORE PPTY has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, GREAT NORTHERN IRON ORE PPTY reported lower earnings of $13.38 versus $15.37 in the prior year.
- You can view the full Great Northern Iron Ore Ratings Report.