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." CreXus Investment (NYSE: CXS) shares currently have a dividend yield of 7.70%. CreXus Investment Corp., together with its subsidiaries, operates as a commercial real estate company. The company has a P/E ratio of 15.71. The average volume for CreXus Investment has been 658,200 shares per day over the past 30 days. CreXus Investment has a market cap of $999.3 million and is part of the real estate industry. Shares are up 6.4% year to date as of the close of trading on Friday. TheStreet Ratings rates CreXus Investment as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The gross profit margin for CREXUS INVESTMENT CORP is rather high; currently it is at 62.40%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 61.15% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 106.93% to $11.69 million when compared to the same quarter last year. In addition, CREXUS INVESTMENT CORP has also vastly surpassed the industry average cash flow growth rate of -20.78%.
- CXS's share price has surged by 27.84% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CXS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CREXUS INVESTMENT CORP's earnings per share declined by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CREXUS INVESTMENT CORP reported lower earnings of $0.85 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($0.97 versus $0.85).
- CXS, with its decline in revenue, underperformed when compared the industry average of 12.0%. Since the same quarter one year prior, revenues fell by 10.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full CreXus Investment Ratings Report.