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 3 stocks with substantial yields, that ultimately, we have rated "Buy."Williams Companies (NYSE: WMB) shares currently have a dividend yield of 4.20%. The Williams Companies, Inc. operates as an energy infrastructure company. The company has a P/E ratio of 36.85. The average volume for Williams Companies has been 7,615,300 shares per day over the past 30 days. Williams Companies has a market cap of $22.9 billion and is part of the energy industry. Shares are up 1.3% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Williams Companies as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- Net operating cash flow has increased to $495.00 million or 14.05% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -25.63%.
- 41.99% is the gross profit margin for WILLIAMS COS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.89% trails the industry average.
- 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 fell by 10.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- WILLIAMS COS INC's earnings per share declined by 48.9% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, WILLIAMS COS INC reported lower earnings of $1.16 versus $1.35 in the prior year. For the next year, the market is expecting a contraction of 35.3% in earnings ($0.75 versus $1.16).
- You can view the full Williams Companies Ratings Report.
- O's very impressive revenue growth greatly exceeded the industry average of 12.3%. Since the same quarter one year prior, revenues leaped by 52.9%. 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.
- 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 82.9% when compared to the same quarter one year prior, rising from $39.26 million to $71.80 million.
- Net operating cash flow has increased to $56.27 million or 11.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -14.81%.
- The gross profit margin for REALTY INCOME CORP is rather high; currently it is at 50.38%. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, O's net profit margin of 41.82% significantly outperformed against the industry.
- REALTY INCOME CORP's earnings per share declined by 27.8% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, REALTY INCOME CORP reported lower earnings of $0.75 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $0.75).
- You can view the full Realty Income Corporation Ratings Report.
- Powered by its strong earnings growth of 26.31% and other important driving factors, this stock has surged by 37.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PSE should continue to move higher despite the fact that it has already enjoyed a very nice gain 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 26.5% when compared to the same quarter one year prior, rising from $13.57 million to $17.17 million.
- The gross profit margin for PIONEER SOUTHWEST ENERGY -LP is rather high; currently it is at 61.74%. Regardless of PSE's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PSE's net profit margin of 36.02% 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 6.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PIONEER SOUTHWEST ENERGY -LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full Pioneer Southwest Energy Partners Ratings Report.
- Our dividend calendar.