TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."American Electric Power (NYSE: AEP) shares currently have a dividend yield of 4.40%. American Electric Power Company, Inc., a public utility holding company, engages in the generation, transmission, and distribution of electric power to retail customers. The company generates electricity using coal and lignite, natural gas, nuclear energy, and hydroelectric energy. The company has a P/E ratio of 17.56 The average volume for American Electric Power has been 3,216,800 shares per day over the past 30 days American Electric Power has a market cap of $21.8 billion and is part of the utilities industry Shares are up 4.9% year to date as of the close of trading on Monday TheStreet Ratings rates American Electric Power as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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.
- 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.
- AMERICAN ELECTRIC POWER CO's earnings per share declined by 6.3% 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, AMERICAN ELECTRIC POWER CO reported lower earnings of $2.60 versus $3.24 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.60).
- Even though the current debt-to-equity ratio is 1.22, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.
- You can view the full American Electric Power Ratings Report.
- The revenue growth came in higher than the industry average of 3.0%. 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.
- 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, SCANA CORP 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 SCANA Ratings Report.
- AT&T INC has improved earnings per share by 11.7% 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 year. We feel that this trend should continue. During the past fiscal year, AT&T INC increased its bottom line by earning $1.21 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $1.21).
- The gross profit margin for AT&T INC is rather high; currently it is at 60.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.79% is above that of the industry average.
- Net operating cash flow has slightly increased to $8,199.00 million or 5.16% when compared to the same quarter last year. Despite an increase in cash flow, AT&T INC's cash flow growth rate is still lower than the industry average growth rate of 17.19%.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income increased by 3.2% when compared to the same quarter one year prior, going from $3,584.00 million to $3,700.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.84, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that T's debt-to-equity ratio is low, the quick ratio, which is currently 0.54, displays a potential problem in covering short-term cash needs.
- You can view the full AT&T Ratings Report.
- 49.50% is the gross profit margin for ECOPETROL SA which we consider to be strong. Regardless of EC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EC's net profit margin of 20.37% significantly outperformed against the industry.
- EC's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.46 is very weak and demonstrates a lack of ability to pay short-term obligations.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.3%. Since the same quarter one year prior, revenues slightly dropped by 9.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ECOPETROL SA's return on equity significantly exceeds that of both the industry average and the S&P 500.
- ECOPETROL SA's earnings per share declined by 22.9% 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, ECOPETROL SA increased its bottom line by earning $4.10 versus $3.94 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings ($3.72 versus $4.10).
- You can view the full Ecopetrol S.A Ratings Report.
- Our dividend calendar.