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." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.20%. Consolidated Edison, Inc., through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses. The company has a P/E ratio of 16.51. The average volume for Consolidated Edison has been 1,743,700 shares per day over the past 30 days. Consolidated Edison has a market cap of $17.3 billion and is part of the utilities industry. Shares are up 3.1% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- ED's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 3.4%. 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.
- 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 Multi-Utilities industry and the overall market on the basis of return on equity, CONSOLIDATED EDISON INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- CONSOLIDATED EDISON INC's earnings per share declined by 30.9% 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, CONSOLIDATED EDISON INC increased its bottom line by earning $3.86 versus $3.57 in the prior year. For the next year, the market is expecting a contraction of 1.6% in earnings ($3.80 versus $3.86).
- Even though the current debt-to-equity ratio is 1.01, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Despite the fact that ED's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.52 is low and demonstrates weak liquidity.
- You can view the full Consolidated Edison Ratings Report.
- PDM's revenue growth trails the industry average of 12.0%. Since the same quarter one year prior, revenues slightly increased by 1.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has increased to $43.00 million or 13.42% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.35%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- PIEDMONT OFFICE REALTY TRUST has improved earnings per share by 18.2% 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, PIEDMONT OFFICE REALTY TRUST reported lower earnings of $0.37 versus $0.49 in the prior year. This year, the market expects an improvement in earnings ($0.43 versus $0.37).
- You can view the full Piedmont Office Realty Ratings Report.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- 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 9.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- TOTAL SA 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. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TOTAL SA reported lower earnings of $6.22 versus $7.05 in the prior year. This year, the market expects an improvement in earnings ($6.48 versus $6.22).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 59.6% when compared to the same quarter one year ago, falling from $4,882.91 million to $1,969.82 million.
- You can view the full Total Ratings Report.
- Our dividend calendar.