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 3 stocks with substantial yields, that ultimately, we have rated "Buy."Annaly Capital Management (NYSE: NLY) shares currently have a dividend yield of 12.20%. 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 8.72. The average volume for Annaly Capital Management has been 9,126,800 shares per day over the past 30 days. Annaly Capital Management has a market cap of $14.0 billion and is part of the real estate industry. Shares are up 5.6% 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 attractive valuation levels, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The gross profit margin for ANNALY CAPITAL MANAGEMENT is currently very high, coming in at 94.50%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 92.42% significantly outperformed against the industry average.
- 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.
- ANNALY CAPITAL MANAGEMENT' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ANNALY CAPITAL MANAGEMENT increased its bottom line by earning $1.69 versus $0.49 in the prior year. For the next year, the market is expecting a contraction of 17.1% in earnings ($1.40 versus $1.69).
- NLY, with its decline in revenue, underperformed when compared the industry average of 9.6%. Since the same quarter one year prior, revenues slightly dropped by 2.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Annaly Capital Management Ratings Report.
- Powered by its strong earnings growth of 125.00% and other important driving factors, this stock has surged by 77.99% 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.
- MEDICAL PROPERTIES TRUST 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.57 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.57).
- 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 147.6% when compared to the same quarter one year prior, rising from $10.56 million to $26.16 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for MEDICAL PROPERTIES TRUST is rather high; currently it is at 60.60%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 60.43% significantly outperformed against the industry average.
- You can view the full Medical Properties 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. 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.
- AT&T INC has improved earnings per share by 11.7% 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 ($2.51 versus $1.21).
- The gross profit margin for AT&T INC is rather high; currently it is at 60.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.79% is above that of the industry average.
- Net operating cash flow has slightly increased to $8,199.00 million or 5.16% when compared to the same quarter last year. Despite an increase in cash flow, AT&T INC's cash flow growth rate is still lower than the industry average growth rate of 19.91%.
- The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that T's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
- You can view the full AT&T Ratings Report.
- Our dividend calendar.