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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Enterprise Products Partners (NYSE: EPD) shares currently have a dividend yield of 4.70%. Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. The company has a P/E ratio of 20.83. Currently there are 16 analysts that rate Enterprise Products Partners a buy, no analysts rate it a sell, and 1 rates it a hold. The average volume for Enterprise Products Partners has been 1,436,100 shares per day over the past 30 days. Enterprise Products Partners has a market cap of $50.7 billion and is part of the energy industry. Shares are up 12.6% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Enterprise Products Partners as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance and good cash flow from operations. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 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.
- ENTERPRISE PRODS PRTNRS -LP's earnings per share declined by 17.1% in the most recent quarter compared to the same quarter a year ago. 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, ENTERPRISE PRODS PRTNRS -LP increased its bottom line by earning $2.71 versus $2.37 in the prior year. This year, the market expects an improvement in earnings ($2.72 versus $2.71).
- Net operating cash flow has increased to $1,275.10 million or 15.67% when compared to the same quarter last year. Despite an increase in cash flow, ENTERPRISE PRODS PRTNRS -LP's cash flow growth rate is still lower than the industry average growth rate of 28.97%.
- EPD, with its decline in revenue, slightly underperformed the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 4.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for ENTERPRISE PRODS PRTNRS -LP is currently extremely low, coming in at 7.60%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.58% trails that of the industry average.
- You can view the full Enterprise Products Partners Ratings Report.