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." Golar LNG (NASDAQ: GLNG) shares currently have a dividend yield of 5.70%. Golar LNG Limited, a midstream liquefied natural gas (LNG) company, engages in the transportation, regasification and liquefaction, and trading of LNG. The company has a P/E ratio of 2.70 The average volume for Golar LNG has been 664,500 shares per day over the past 30 days Golar LNG has a market cap of $2.5 billion and is part of the transportation industry Shares are down 14.3% year to date as of the close of trading on Monday TheStreet Ratings rates Golar LNG as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 463.8% when compared to the same quarter one year prior, rising from $15.18 million to $85.56 million.
- GLNG's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- 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, GOLAR LNG LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for GOLAR LNG LTD is rather high; currently it is at 67.77%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 243.66% significantly outperformed against the industry average.
- GOLAR LNG LTD reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GOLAR LNG LTD increased its bottom line by earning $11.66 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 89.8% in earnings ($1.19 versus $11.66).
- You can view the full Golar LNG Ratings Report.