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." Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.10%. Plains All American Pipeline, L.P., through its subsidiaries, engages in the transportation, storage, terminalling, and marketing of crude oil and refined products in the United States and Canada. The company operates in three segments: Transportation, Facilities, and Supply and Logistics. The company has a P/E ratio of 17.92. The average volume for Plains All American Pipeline has been 1,097,200 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $19.2 billion and is part of the energy industry. Shares are up 25.2% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and compelling growth in net income. 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 rose by 15.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 149.01% and other important driving factors, this stock has surged by 31.12% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 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 129.6% when compared to the same quarter one year prior, rising from $230.00 million to $528.00 million.
- Net operating cash flow has significantly increased by 208.83% to $979.00 million when compared to the same quarter last year. In addition, PLAINS ALL AMER PIPELNE -LP has also vastly surpassed the industry average cash flow growth rate of -25.84%.
- You can view the full Plains All American Pipeline Ratings Report.
- Since the same quarter one year prior, revenues rose by 19.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has significantly increased by 229.25% to $972.00 million when compared to the same quarter last 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 where it was trading one year ago, SLF is up 47.92% to its most recent closing price of 32.10. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
- The current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels.
- You can view the full Sun Life Financial Ratings Report.
- Net operating cash flow has significantly increased by 407.45% to $48.32 million when compared to the same quarter last year. In addition, HAWAIIAN ELECTRIC INDS has also vastly surpassed the industry average cash flow growth rate of 24.61%.
- HAWAIIAN ELECTRIC INDS's earnings per share declined by 15.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, HAWAIIAN ELECTRIC INDS reported lower earnings of $1.43 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.43).
- HE, with its decline in revenue, underperformed when compared the industry average of 18.0%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Even though the current debt-to-equity ratio is 1.07, it is still below the industry average, suggesting that this level of debt is acceptable within the Electric Utilities industry.
- You can view the full Hawaiian Electric Industries Ratings Report.
- Our dividend calendar.