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." AGL Resources (NYSE: GAS) shares currently have a dividend yield of 4.40%. AGL Resources Inc., an energy services holding company, distributes natural gas to residential, commercial, industrial, and governmental customers in Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. The company has a P/E ratio of 18.49. The average volume for AGL Resources has been 517,900 shares per day over the past 30 days. AGL Resources has a market cap of $5.0 billion and is part of the utilities industry. Shares are up 7% year to date as of the close of trading on Thursday. TheStreet Ratings rates AGL Resources as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year, growth in earnings per share, compelling growth in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- GAS's very impressive revenue growth greatly exceeded the industry average of 3.6%. Since the same quarter one year prior, revenues leaped by 54.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- AGL RESOURCES INC 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, AGL RESOURCES INC increased its bottom line by earning $2.31 versus $2.15 in the prior year. This year, the market expects an improvement in earnings ($2.64 versus $2.31).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 197.0% when compared to the same quarter one year prior, rising from $33.00 million to $98.00 million.
- You can view the full AGL Resources Ratings Report.