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 5 stocks with substantial yields, that ultimately, we have rated "Buy." SCANA (NYSE: SCG) shares currently have a dividend yield of 4.10%. SCANA Corporation, through its subsidiaries, engages in the generation, transmission, distribution, and sale of electricity to retail and wholesale customers in South Carolina. It owns nuclear, coal, hydro, oil and gas, and biomass generating facilities. The company has a P/E ratio of 14.92. The average volume for SCANA has been 671,000 shares per day over the past 30 days. SCANA has a market cap of $7.0 billion and is part of the utilities industry. Shares are up 6.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates SCANA as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- SCANA CORP has improved earnings per share by 22.0% 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, SCANA CORP increased its bottom line by earning $3.14 versus $2.99 in the prior year. This year, the market expects an improvement in earnings ($3.36 versus $3.14).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 24.8% when compared to the same quarter one year prior, going from $121.00 million to $151.00 million.
- Net operating cash flow has slightly increased to $193.00 million or 4.32% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.56%.
- You can view the full SCANA Ratings Report.