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." CenturyLink (NYSE: CTL) shares currently have a dividend yield of 5.70%. CenturyLink, Inc. operates as an integrated telecommunications company in the United States. The company has a P/E ratio of 22.53. The average volume for CenturyLink has been 6,162,600 shares per day over the past 30 days. CenturyLink has a market cap of $23.1 billion and is part of the telecommunications industry. Shares are down 4.3% year to date as of the close of trading on Thursday. TheStreet Ratings rates CenturyLink as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, reasonable valuation levels, expanding profit margins, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- 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 49.0% when compared to the same quarter one year prior, rising from $200.00 million to $298.00 million.
- The gross profit margin for CENTURYLINK INC is rather high; currently it is at 60.30%. 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 6.60% trails the industry average.
- CENTURYLINK INC reported significant earnings per share improvement 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, CENTURYLINK INC reported lower earnings of $1.24 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $1.24).
- CTL, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full CenturyLink Ratings Report.
- The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 30.3%. 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, SNH's share price has jumped by 32.04%, 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, SNH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 8.9% when compared to the same quarter one year prior, going from $32.35 million to $35.24 million.
- Net operating cash flow has slightly increased to $73.70 million or 1.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -34.71%.
- You can view the full Senior Housing Properties Ratings Report.
- Net operating cash flow has significantly increased by 407.45% to $48.32 million when compared to the same quarter last year. In addition, HAWAIIAN ELECTRIC INDS has also vastly surpassed the industry average cash flow growth rate of -1.88%.
- HAWAIIAN ELECTRIC INDS's earnings per share declined by 15.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, HAWAIIAN ELECTRIC INDS reported lower earnings of $1.43 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.43).
- HE, with its decline in revenue, underperformed when compared the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry.
- You can view the full Hawaiian Electric Industries Ratings Report.
- Our dividend calendar.