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." PVR Partners (NYSE: PVR) shares currently have a dividend yield of 7.90%. PVR Partners, L.P. engages in the gathering and processing of natural gas; and management of coal and natural resource properties in the United States. The company operates in three segments: Eastern Midstream, Midcontinent Midstream, and Coal and Natural Resource Management. The average volume for PVR Partners has been 416,300 shares per day over the past 30 days. PVR Partners has a market cap of $2.7 billion and is part of the utilities industry. Shares are up 7.7% year to date as of the close of trading on Wednesday. TheStreet Ratings rates PVR Partners 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, compelling growth in net income, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 10.7%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- 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 106.6% when compared to the same quarter one year prior, rising from -$110.34 million to $7.24 million.
- Net operating cash flow has significantly increased by 75.82% to $79.42 million when compared to the same quarter last year. In addition, PVR PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -25.63%.
- PVR PARTNERS LP reported significant earnings per share improvement 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, PVR PARTNERS LP swung to a loss, reporting -$1.60 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($0.63 versus -$1.60).
- You can view the full PVR Partners Ratings Report.