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." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.10%. Consolidated Edison, Inc., through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses. The company has a P/E ratio of 15.68. Currently there are 2 analysts that rate Consolidated Edison a buy, 2 analysts rate it a sell, and 8 rate it a hold. The average volume for Consolidated Edison has been 1,531,400 shares per day over the past 30 days. Consolidated Edison has a market cap of $17.7 billion and is part of the utilities industry. Shares are up 9.3% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Multi-Utilities industry average. The net income increased by 7.3% when compared to the same quarter one year prior, going from $193.00 million to $207.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.95, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- 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. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, CONSOLIDATED EDISON INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- You can view the full Consolidated Edison Ratings Report.
- Compared to its closing price of one year ago, CXS's share price has jumped by 26.77%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CXS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has significantly increased by 93.99% to $18.23 million when compared to the same quarter last year. In addition, CREXUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of 38.95%.
- The gross profit margin for CREXUS INVESTMENT CORP is currently very high, coming in at 74.50%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CXS's net profit margin of 84.39% significantly outperformed against the industry.
- CREXUS INVESTMENT 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CREXUS INVESTMENT CORP reported lower earnings of $0.85 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.85).
- CXS, with its very weak revenue results, has greatly underperformed against the industry average of 16.4%. Since the same quarter one year prior, revenues plummeted by 54.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full CreXus Investment Ratings Report.
- TARGA RESOURCES PARTNERS LP 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TARGA RESOURCES PARTNERS LP reported lower earnings of $1.20 versus $1.98 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $1.20).
- NGLS, with its decline in revenue, underperformed when compared the industry average of 1.7%. Since the same quarter one year prior, revenues fell by 21.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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, the stock's 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 the other strengths this company displays justify these higher price levels.
- The gross profit margin for TARGA RESOURCES PARTNERS LP is currently extremely low, coming in at 11.40%. Regardless of NGLS'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 2.18% trails the industry average.
- Net operating cash flow has decreased to $149.90 million or 28.48% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full Targa Resources Partners Ratings Report.
- COP's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 37.40% is the gross profit margin for CONOCOPHILLIPS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.15% is above that of the industry average.
- 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, CONOCOPHILLIPS has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- CONOCOPHILLIPS 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CONOCOPHILLIPS increased its bottom line by earning $5.87 versus $5.09 in the prior year. For the next year, the market is expecting a contraction of 7.0% in earnings ($5.46 versus $5.87).
- You can view the full ConocoPhillips Ratings Report.
- Our dividend calendar.