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."Blackstone Group (NYSE: BX) shares currently have a dividend yield of 8.50%. The Blackstone Group L.P., together with its subsidiaries, provides alternative asset management and financial advisory services worldwide. It operates in five segments: Private Equity, Real Estate, Hedge Fund Solutions, Credit Businesses, and Financial Advisory. The company has a P/E ratio of 48.24. Currently there are 9 analysts that rate Blackstone Group a buy, no analysts rate it a sell, and 2 rate it a hold. The average volume for Blackstone Group has been 5,468,000 shares per day over the past 30 days. Blackstone Group has a market cap of $11.0 billion and is part of the financial services industry. Shares are up 24.3% year to date as of the close of trading on Monday. TheStreet Ratings rates Blackstone Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 33.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BLACKSTONE GROUP LP reported significant earnings per share improvement 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, BLACKSTONE GROUP LP turned its bottom line around by earning $0.40 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $0.40).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 569.3% when compared to the same quarter one year prior, rising from -$22.68 million to $106.41 million.
- Powered by its strong earnings growth of 575.00% and other important driving factors, this stock has surged by 25.58% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Capital Markets industry and the overall market, BLACKSTONE GROUP LP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Blackstone Group Ratings Report.
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 10.3%. 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.
- The gross profit margin for CHIMERA INVESTMENT CORP is currently very high, coming in at 88.80%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 25.51% trails the industry average.
- Net operating cash flow has increased to $109.58 million or 36.72% when compared to the same quarter last year. Despite an increase in cash flow, CHIMERA INVESTMENT CORP's average is still marginally south of the industry average growth rate of 38.95%.
- 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- You can view the full Chimera Investment Corporation Ratings Report.
- KKR's very impressive revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues leaped by 121.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Capital Markets industry and the overall market, KKR & CO LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Powered by its strong earnings growth of 80.00% and other important driving factors, this stock has surged by 30.27% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- KKR & CO LP reported significant earnings per share improvement 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, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($2.30 versus $2.23).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 109.7% when compared to the same quarter one year prior, rising from $46.14 million to $96.73 million.
- You can view the full KKR Ratings Report.
- Our dividend calendar.