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." Companhia de Bebidas das Americas Ambev (NYSE: ABV) shares currently have a dividend yield of 4.20%. Companhia de Bebidas das Americas Ambev engages in the production, distribution, and sale of beer, draft beer, carbonated soft drinks, malt, and other non-alcoholic and non-carbonated products in the Americas. It also sells bottled water, isotonics, and ready-to-drink teas. The company has a P/E ratio of 103.62. The average volume for Companhia de Bebidas das Americas Ambev has been 2,105,400 shares per day over the past 30 days. Companhia de Bebidas das Americas Ambev has a market cap of $131.4 billion and is part of the food & beverage industry. Shares are down 2.7% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Companhia de Bebidas das Americas Ambev as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- ABV's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 9.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- COMPANHIA DE BEBIDAS DAS AME has improved earnings per share by 9.6% 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, COMPANHIA DE BEBIDAS DAS AME increased its bottom line by earning $1.64 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($1.80 versus $1.64).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Beverages industry average. The net income increased by 11.2% when compared to the same quarter one year prior, going from $1,604.89 million to $1,784.44 million.
- 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 Beverages industry and the overall market, COMPANHIA DE BEBIDAS DAS AME's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for COMPANHIA DE BEBIDAS DAS AME is rather high; currently it is at 69.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 36.84% significantly outperformed against the industry average.
- You can view the full Companhia de Bebidas das Americas Ambev Ratings Report.