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." Old Republic International (NYSE: ORI) shares currently have a dividend yield of 5.50%. Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products primarily in the United States and Canada. The average volume for Old Republic International has been 1,587,400 shares per day over the past 30 days Old Republic International has a market cap of $3.4 billion and is part of the insurance industry Shares are up 22.5% year to date as of the close of trading on Wednesday TheStreet Ratings rates Old Republic International as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures 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:
- This stock has managed to rise its share value by 54.28% over the past twelve months. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ORI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- OLD REPUBLIC INTL CORP has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. 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, OLD REPUBLIC INTL CORP continued to lose money by earning -$0.27 versus -$0.55 in the prior year. This year, the market expects an improvement in earnings ($0.58 versus -$0.27).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 13950.0% when compared to the same quarter one year prior, rising from $0.40 million to $56.20 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 18.6%. Since the same quarter one year prior, revenues slightly increased by 9.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- ORI's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- You can view the full Old Republic International Ratings Report.