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." Liberty Property (NYSE: LRY) shares currently have a dividend yield of 5.40%. Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 34.17. The average volume for Liberty Property has been 780,100 shares per day over the past 30 days. Liberty Property has a market cap of $4.2 billion and is part of the real estate industry. Shares are down 2.7% year to date as of the close of trading on Monday. TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 92.1% when compared to the same quarter one year prior, rising from $37.09 million to $71.24 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 12.1%. Since the same quarter one year prior, revenues slightly increased by 6.2%. 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.
- LIBERTY PROPERTY TRUST's earnings per share declined by 10.7% 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, LIBERTY PROPERTY TRUST increased its bottom line by earning $1.05 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.22 versus $1.05).
- In its most recent trading session, LRY 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Liberty Property Ratings Report.
- TE, with its decline in revenue, slightly underperformed the industry average of 0.0%. Since the same quarter one year prior, revenues slightly dropped by 5.2%. 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 1.30, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.71 is weak.
- The gross profit margin for TECO ENERGY INC is currently lower than what is desirable, coming in at 28.20%. Regardless of TE's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 6.27% trails the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Multi-Utilities industry and the overall market on the basis of return on equity, TECO ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full TECO Energy Ratings Report.
- BPT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 2.65, which clearly demonstrates the ability to cover short-term cash needs.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BP PRUDHOE BAY ROYALTY TRUST's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for BP PRUDHOE BAY ROYALTY TRUST is currently very high, coming in at 100.00%. BPT has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, BPT's net profit margin of 99.66% significantly outperformed against the industry.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.7%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, BPT has underperformed the S&P 500 Index, declining 17.13% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full BP Prudhoe Bay Royalty Ratings Report.
- Our dividend calendar.