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 4 stocks with substantial yields, that ultimately, we have rated "Buy."Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 11.30%. Annaly Capital Management, Inc. owns, manages, and finances a portfolio of real estate related investments in United States. The company has a P/E ratio of 9.27. The average volume for Annaly Capital Management has been 8,633,300 shares per day over the past 30 days. Annaly Capital Management has a market cap of $15.0 billion and is part of the real estate industry. Shares are up 10.6% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Annaly Capital Management as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, expanding profit margins, good cash flow from operations and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 57.2% when compared to the same quarter one year prior, rising from $445.56 million to $700.50 million.
- The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 95.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 76.74% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 121.67% to $352.76 million when compared to the same quarter last year. In addition, ANNALY CAPITAL MANAGEMENT has also vastly surpassed the industry average cash flow growth rate of 38.81%.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ANNALY CAPITAL MANAGEMENT has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full Annaly Capital Management Ratings Report.
- The revenue growth came in higher than the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 29.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 19.4% when compared to the same quarter one year prior, going from $45.72 million to $54.57 million.
- Net operating cash flow has significantly increased by 54.24% to $186.41 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 38.55%.
- DIGITAL REALTY TRUST INC has improved earnings per share by 5.9% 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DIGITAL REALTY TRUST INC increased its bottom line by earning $1.47 versus $1.31 in the prior year. For the next year, the market is expecting a contraction of 0.7% in earnings ($1.46 versus $1.47).
- You can view the full Digital Realty Ratings Report.
- OKS, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, OKS 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.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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, ONEOK PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for ONEOK PARTNERS -LP is currently extremely low, coming in at 9.50%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 7.21% trails that of the industry average.
- You can view the full ONEOK Partners L.P Ratings Report.
- EEP, with its decline in revenue, underperformed when compared the industry average of 1.3%. Since the same quarter one year prior, revenues fell by 14.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.60%. Regardless of EEP'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 3.06% trails the industry average.
- Net operating cash flow has significantly decreased to $142.70 million or 63.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio of 1.35 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, EEP has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENBRIDGE ENERGY PRTNRS -LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Enbridge Energy Partners Ratings Report.
- Our dividend calendar.