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." Boardwalk Pipeline Partners (NYSE: BWP) shares currently have a dividend yield of 6.60%. Boardwalk Pipeline Partners, LP, through its subsidiaries, engages in the ownership and operation of integrated natural gas and natural gas liquids (NGLs) pipelines, and storage systems in the United States. The company also transports, stores, gathers, and processes natural gas and NGLs. The company has a P/E ratio of 23.58. The average volume for Boardwalk Pipeline Partners has been 805,800 shares per day over the past 30 days. Boardwalk Pipeline Partners has a market cap of $6.7 billion and is part of the energy industry. Shares are up 29.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Boardwalk Pipeline Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, 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 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 5.0%. 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 exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 9.5% when compared to the same quarter one year prior, going from $92.60 million to $101.40 million.
- Net operating cash flow has increased to $129.30 million or 17.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -25.59%.
- The gross profit margin for BOARDWALK PIPELINE PRTNRS-LP is rather high; currently it is at 62.95%. Regardless of BWP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BWP's net profit margin of 30.86% significantly outperformed against the industry.
- 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, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full Boardwalk Pipeline Partners Ratings Report.
- RCI's revenue growth has slightly outpaced the industry average of 1.7%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ROGERS COMMUNICATIONS has improved earnings per share by 11.5% 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. During the past fiscal year, ROGERS COMMUNICATIONS increased its bottom line by earning $3.30 versus $2.88 in the prior year.
- 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 Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 52.46% to $805.00 million when compared to the same quarter last year. In addition, ROGERS COMMUNICATIONS has also vastly surpassed the industry average cash flow growth rate of -19.17%.
- 37.03% is the gross profit margin for ROGERS COMMUNICATIONS 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 11.66% trails the industry average.
- You can view the full Rogers Communications Ratings Report.
- Compared to its closing price of one year ago, KKR's share price has jumped by 53.28%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- 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 Capital Markets industry and the overall market, KKR & CO LP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 314.30% to $1,510.12 million when compared to the same quarter last year. In addition, KKR & CO LP has also vastly surpassed the industry average cash flow growth rate of -296.58%.
- KKR & CO LP's earnings per share declined by 13.8% 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, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. This year, the market expects an improvement in earnings ($2.49 versus $2.23).
- KKR, with its decline in revenue, underperformed when compared the industry average of 6.0%. Since the same quarter one year prior, revenues fell by 17.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full KKR Ratings Report.
- Our dividend calendar.