Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.20%. Plains All American Pipeline, L.P., through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil and refined products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. The company has a P/E ratio of 22.50. Currently there are 13 analysts that rate Plains All American Pipeline a buy, no analysts rate it a sell, and 5 rate it a hold. The average volume for Plains All American Pipeline has been 1,004,800 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $18.2 billion and is part of the energy industry. Shares are up 19.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, reasonable valuation levels and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- PAA's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 6.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.56% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PAA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past 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 Oil, Gas & Consumable Fuels industry average. The net income increased by 15.1% when compared to the same quarter one year prior, going from $278.00 million to $320.00 million.
- PLAINS ALL AMER PIPELNE -LP reported flat earnings per share in the most recent 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, PLAINS ALL AMER PIPELNE -LP reported lower earnings of $2.40 versus $2.44 in the prior year. This year, the market expects an improvement in earnings ($2.94 versus $2.40).
- You can view the full Plains All American Pipeline Ratings Report.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- Net operating cash flow has slightly increased to $329.00 million or 5.44% when compared to the same quarter last year. Despite an increase in cash flow, AMEREN CORP's average is still marginally south of the industry average growth rate of 12.18%.
- AMEREN CORP 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 of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AMEREN CORP swung to a loss, reporting -$4.01 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($2.10 versus -$4.01).
- AEE, with its decline in revenue, slightly underperformed the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 4.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Even though the current debt-to-equity ratio is 1.03, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
- You can view the full Ameren Ratings Report.
- MMP's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- MAGELLAN MIDSTREAM PRTNRS LP has improved earnings per share by 40.2% 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. We feel that this trend should continue. During the past fiscal year, MAGELLAN MIDSTREAM PRTNRS LP increased its bottom line by earning $1.93 versus $1.83 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $1.93).
- 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 39.5% when compared to the same quarter one year prior, rising from $110.26 million to $153.80 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGELLAN MIDSTREAM PRTNRS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 49.80% is the gross profit margin for MAGELLAN MIDSTREAM PRTNRS LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 30.56% significantly outperformed against the industry average.
- You can view the full Magellan Midstream Partners L.P Ratings Report.
- Our dividend calendar.