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." Blackstone Group (NYSE: BX) shares currently have a dividend yield of 5.50%. The Blackstone Group L.P., together with its subsidiaries, provides alternative asset management and financial advisory services worldwide. It operates in five segments: Private Equity, Real Estate, Hedge Fund Solutions, Credit Businesses, and Financial Advisory. The company has a P/E ratio of 37.10. The average volume for Blackstone Group has been 5,202,900 shares per day over the past 30 days. Blackstone Group has a market cap of $12.2 billion and is part of the financial services industry. Shares are up 40.4% year to date as of the close of trading on Monday. TheStreet Ratings rates Blackstone Group as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 30.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BLACKSTONE GROUP LP 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, BLACKSTONE GROUP LP turned its bottom line around by earning $0.40 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($2.29 versus $0.40).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 187.4% when compared to the same quarter one year prior, rising from $58.33 million to $167.64 million.
- Net operating cash flow has significantly increased by 722.70% to $1,104.30 million when compared to the same quarter last year. In addition, BLACKSTONE GROUP LP has also vastly surpassed the industry average cash flow growth rate of -343.15%.
- 37.00% is the gross profit margin for BLACKSTONE GROUP LP which we consider to be strong. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.44% trails the industry average.
- You can view the full Blackstone Group Ratings Report.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.6%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, EEP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- Net operating cash flow has decreased to $205.90 million or 20.03% when compared to the same quarter last year. Despite a decrease in cash flow of 20.03%, ENBRIDGE ENERGY PRTNRS -LP is in line with the industry average cash flow growth rate of -25.50%.
- The gross profit margin for ENBRIDGE ENERGY PRTNRS -LP is currently lower than what is desirable, coming in at 27.60%. Regardless of EEP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EEP's net profit margin of -4.92% significantly underperformed when compared to the industry average.
- ENBRIDGE ENERGY PRTNRS -LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ENBRIDGE ENERGY PRTNRS -LP reported lower earnings of $1.25 versus $1.89 in the prior year. For the next year, the market is expecting a contraction of 18.8% in earnings ($1.02 versus $1.25).
- You can view the full Enbridge Energy Partners Ratings Report.
- Powered by its strong earnings growth of 456.25% and other important driving factors, this stock has surged by 37.32% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CXW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- CORRECTIONS CORP AMER reported significant earnings per share improvement 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, CORRECTIONS CORP AMER increased its bottom line by earning $1.56 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($2.07 versus $1.56).
- 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 471.6% when compared to the same quarter one year prior, rising from $31.68 million to $181.09 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CORRECTIONS CORP AMER's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- You can view the full Corrections Corporation of America Ratings Report.
- Our dividend calendar.