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." Meredith Corporation (NYSE: MDP) shares currently have a dividend yield of 4.40%. Meredith Corporation, a media and marketing company, engages in magazine publishing and related brand licensing, television broadcasting, digital and customer relationship marketing, digital and mobile media, and video creation operations in the United States. The company has a P/E ratio of 14.90. The average volume for Meredith Corporation has been 584,900 shares per day over the past 30 days. Meredith Corporation has a market cap of $1.3 billion and is part of the media industry. Shares are up 5.6% year to date as of the close of trading on Thursday. TheStreet Ratings rates Meredith Corporation as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- MDP's revenue growth has slightly outpaced the industry average of 8.4%. Since the same quarter one year prior, revenues slightly increased by 9.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 27.54% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MDP 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 slightly increased to $69.81 million or 7.20% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -6.29%.
- The gross profit margin for MEREDITH CORP is rather high; currently it is at 62.80%. 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 9.86% trails the industry average.
- You can view the full Meredith Corporation Ratings Report.
- RDS.B's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 2.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has significantly increased by 53.33% to $9,913.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 20.63%.
- The net income growth from the same quarter one year ago is equivalent to that of the Oil, Gas & Consumable Fuels industry, but is greater than that of the S&P 500. The net income increased by 2.6% when compared to the same quarter one year prior, going from $6,500.00 million to $6,671.00 million.
- RDS.B's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
- You can view the full Royal Dutch Shell Ratings Report.
- Powered by its strong earnings growth of 39.28% and other important driving factors, this stock has surged by 26.56% 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.
- AT&T INC has improved earnings per share by 39.3% 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, AT&T INC increased its bottom line by earning $1.21 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($2.52 versus $1.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Telecommunication Services industry. The net income increased by 42.2% when compared to the same quarter one year prior, rising from -$6,678.00 million to -$3,857.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 0.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $10,232.00 million or 36.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 13.50%.
- You can view the full AT&T Ratings Report.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- The current debt-to-equity ratio, 0.43, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
- ASTRAZENECA PLC has improved earnings per share by 8.0% 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, ASTRAZENECA PLC reported lower earnings of $4.98 versus $7.27 in the prior year. This year, the market expects an improvement in earnings ($5.53 versus $4.98).
- The gross profit margin for ASTRAZENECA PLC is currently very high, coming in at 92.00%. Regardless of AZN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AZN's net profit margin of 21.19% compares favorably to the industry average.
- You can view the full AstraZeneca Ratings Report.
- Our dividend calendar.