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." TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.20%. TAL International Group, Inc. engages in leasing intermodal containers and chassis worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 10.60. The average volume for TAL International Group has been 364,200 shares per day over the past 30 days. TAL International Group has a market cap of $1.4 billion and is part of the diversified services industry. Shares are up 16.9% year to date as of the close of trading on Monday. TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, growth in earnings per share and expanding profit margins. 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:
- TAL's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 12.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- TAL INTERNATIONAL GROUP INC has improved earnings per share by 14.3% 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. We feel that this trend should continue. During the past fiscal year, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $3.87 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($4.40 versus $3.87).
- 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. In comparison to the other companies in the Trading Companies & Distributors industry and the overall market, TAL INTERNATIONAL GROUP INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 86.18%. Regardless of TAL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAL's net profit margin of 24.03% significantly outperformed against the industry.
- You can view the full TAL International Group Ratings Report.
- AEP's revenue growth trails the industry average of 18.0%. Since the same quarter one year prior, revenues slightly increased by 5.5%. 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.
- 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. 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.
- AMERICAN ELECTRIC POWER CO's earnings per share declined by 6.3% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AMERICAN ELECTRIC POWER CO reported lower earnings of $2.60 versus $3.24 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.60).
- Even though the current debt-to-equity ratio is 1.22, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.34 is very low and demonstrates very weak liquidity.
- The gross profit margin for AMERICAN ELECTRIC POWER CO is currently lower than what is desirable, coming in at 31.50%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 9.48% is above that of the industry average.
- You can view the full American Electric Power Ratings Report.
- GOV's revenue growth has slightly outpaced the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 15.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 35.87% is the gross profit margin for GOVERNMENT PPTYS INCOME TR which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 42.80% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $29.65 million or 1.15% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.85%.
- 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 89.3% when compared to the same quarter one year prior, rising from $13.06 million to $24.73 million.
- You can view the full Government Properties Income Ratings Report.
- Our dividend calendar.