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." Sun Life Financial (NYSE: SLF) shares currently have a dividend yield of 4.90%. Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers. The company has a P/E ratio of 12.98. The average volume for Sun Life Financial has been 413,200 shares per day over the past 30 days. Sun Life Financial has a market cap of $17.6 billion and is part of the insurance industry. Shares are up 9.8% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Sun Life Financial as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, notable return on equity, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- Compared to where it was trading one year ago, SLF is up 31.29% to its most recent closing price of 28.99. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
- The net income increased by 185.3% when compared to the same quarter one year prior, rising from -$498.00 million to $425.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation.
- The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels.
- You can view the full Sun Life Financial Ratings Report.
- The revenue growth came in higher than the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 15.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 0.8% when compared to the same quarter one year prior, going from $2,202.93 million to $2,220.02 million.
- Net operating cash flow has significantly increased by 53.01% to $4,898.80 million when compared to the same quarter last year. In addition, ECOPETROL SA has also vastly surpassed the industry average cash flow growth rate of -23.86%.
- 42.60% is the gross profit margin for ECOPETROL SA which we consider to be strong. Regardless of EC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EC's net profit margin of 20.48% significantly outperformed against the industry.
- EC's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that EC's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.
- You can view the full Ecopetrol S.A Ratings Report.
- The revenue growth came in higher than the industry average of 8.8%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, CLMT's share price has jumped by 52.67%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CLMT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, CALUMET SPECIALTY PRODS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- CALUMET SPECIALTY PRODS -LP's earnings per share declined by 31.9% in the most recent quarter compared to the same quarter a year ago. 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, CALUMET SPECIALTY PRODS -LP increased its bottom line by earning $3.53 versus $0.89 in the prior year. For the next year, the market is expecting a contraction of 9.9% in earnings ($3.18 versus $3.53).
- You can view the full Calumet Specialty Products Partners Ratings Report.
- Compared to its closing price of one year ago, KKR's share price has jumped by 61.15%, exceeding the performance of the broader market during that same time frame. 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.
- KKR & CO LP's earnings per share declined by 13.8% 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, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($2.51 versus $2.23).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Capital Markets industry average. The net income increased by 1.6% when compared to the same quarter one year prior, going from $190.44 million to $193.44 million.
- KKR, with its decline in revenue, underperformed when compared the industry average of 5.3%. Since the same quarter one year prior, revenues fell by 17.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full KKR Ratings Report.
- Our dividend calendar.