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." Enterprise Products Partners (NYSE: EPD) shares currently have a dividend yield of 4.50%. 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 21.91. The average volume for Enterprise Products Partners has been 1,390,300 shares per day over the past 30 days. Enterprise Products Partners has a market cap of $53.4 billion and is part of the energy industry. Shares are up 20.8% year to date as of the close of trading on Tuesday. 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, notable return on equity 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:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite 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 ($2.73 versus $2.71).
- 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, ENTERPRISE PRODS PRTNRS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- 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 average is still marginally south of the industry average growth rate of 20.25%.
- EPD, with its decline in revenue, slightly underperformed the industry average of 1.3%. 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.
- You can view the full Enterprise Products Partners Ratings Report.
- Net operating cash flow has significantly increased by 80.72% to $149.10 million when compared to the same quarter last year. In addition, TECO ENERGY INC has also vastly surpassed the industry average cash flow growth rate of 12.41%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- TE, 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%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Even though the current debt-to-equity ratio is 1.30, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.72 is weak.
- You can view the full TECO Energy Ratings Report.
- 40.80% is the gross profit margin for SPECTRA ENERGY CORP which we consider to be strong. Regardless of SE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SE's net profit margin of 15.81% compares favorably to the industry average.
- SPECTRA ENERGY CORP's earnings per share declined by 27.3% in the most recent quarter compared to 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, SPECTRA ENERGY CORP reported lower earnings of $1.43 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($1.53 versus $1.43).
- SE, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 5.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, SE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 declined marginally to $484.00 million or 3.00% 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 Spectra Energy Ratings Report.
- Our dividend calendar.