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."Boardwalk Pipeline Partners (NYSE: BWP) shares currently have a dividend yield of 7.40%. Boardwalk Pipeline Partners, LP, through its subsidiaries, engages in the ownership and operation of integrated natural gas and natural gas liquids (NGLs) pipelines, and storage systems in the United States. The company also transports, stores, gathers, and processes natural gas and NGLs. The company has a P/E ratio of 21.12. Currently there are 2 analysts that rate Boardwalk Pipeline Partners a buy, 3 analysts rate it a sell, and 9 rate it a hold. The average volume for Boardwalk Pipeline Partners has been 599,800 shares per day over the past 30 days. Boardwalk Pipeline Partners has a market cap of $6.0 billion and is part of the energy industry. Shares are up 15.7% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Boardwalk Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, compelling growth in net income, expanding profit margins and good cash flow from operations. 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:
- The revenue growth came in higher than the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BOARDWALK PIPELINE PRTNRS-LP has improved earnings per share by 5.5% 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 year. We feel that this trend should continue. During the past fiscal year, BOARDWALK PIPELINE PRTNRS-LP increased its bottom line by earning $1.37 versus $1.09 in the prior year. This year, the market expects an improvement in earnings ($1.38 versus $1.37).
- 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 20.8% when compared to the same quarter one year prior, going from $74.60 million to $90.10 million.
- The gross profit margin for BOARDWALK PIPELINE PRTNRS-LP is rather high; currently it is at 62.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.66% significantly outperformed against the industry average.
- Net operating cash flow has increased to $161.40 million or 49.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 29.14%.
- You can view the full Boardwalk Pipeline Partners Ratings Report.
- BUCKEYE PARTNERS LP's earnings per share declined by 45.3% 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, BUCKEYE PARTNERS LP increased its bottom line by earning $2.31 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($3.31 versus $2.31).
- BPL, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues fell by 12.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BUCKEYE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The gross profit margin for BUCKEYE PARTNERS LP is rather low; currently it is at 15.90%. Regardless of BPL's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 3.04% trails the industry average.
- The share price of BUCKEYE PARTNERS LP has not done very well: it is down 5.15% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full Buckeye Partners L.P Ratings Report.
- The revenue growth greatly exceeded the industry average of 2.9%. Since the same quarter one year prior, revenues rose by 29.3%. 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 36.8% when compared to the same quarter one year prior, rising from $2,495.48 million to $3,413.92 million.
- Net operating cash flow has significantly increased by 192.85% to $8,281.29 million when compared to the same quarter last year. In addition, TOTAL SA has also vastly surpassed the industry average cash flow growth rate of 29.14%.
- TOTAL SA has improved earnings per share by 35.5% 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, TOTAL SA reported lower earnings of $6.22 versus $7.05 in the prior year. This year, the market expects an improvement in earnings ($6.98 versus $6.22).
- You can view the full Total Ratings Report.
- Our dividend calendar.