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." Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.10%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 43.52. The average volume for Mid-America Apartment Communities has been 320,600 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $2.9 billion and is part of the real estate industry. Shares are up 6.1% year to date as of the close of trading on Friday. TheStreet Ratings rates Mid-America Apartment Communities as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, robust revenue growth, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- MID-AMERICA APT CMNTYS 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 two years. We feel that this trend should continue. During the past fiscal year, MID-AMERICA APT CMNTYS INC increased its bottom line by earning $1.56 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.69 versus $1.56).
- 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 18.9% when compared to the same quarter one year prior, going from $18.76 million to $22.31 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.4%. Since the same quarter one year prior, revenues rose by 16.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $53.23 million or 22.87% when compared to the same quarter last year. Despite an increase in cash flow, MID-AMERICA APT CMNTYS INC's cash flow growth rate is still lower than the industry average growth rate of 38.58%.
- In its most recent trading session, MAA 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.
- You can view the full Mid-America Apartment Communities Ratings Report.