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." AmeriGas Partners (NYSE: APU) shares currently have a dividend yield of 7.40%. AmeriGas Partners, L.P. operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. The company has a P/E ratio of 27.09. The average volume for AmeriGas Partners has been 249,900 shares per day over the past 30 days. AmeriGas Partners has a market cap of $4.2 billion and is part of the utilities industry. Shares are up 17.5% year to date as of the close of trading on Thursday. TheStreet Ratings rates AmeriGas Partners as a buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, expanding profit margins, good cash flow from operations and growth in earnings per share. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Gas Utilities industry. The net income increased by 59.2% when compared to the same quarter one year prior, rising from $133.89 million to $213.21 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 47.83% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.12% significantly outperformed against the industry average.
- Net operating cash flow has slightly increased to $174.66 million or 5.89% when compared to the same quarter last year. In addition, AMERIGAS PARTNERS -LP has also modestly surpassed the industry average cash flow growth rate of 4.80%.
- AMERIGAS PARTNERS -LP has improved earnings per share by 23.8% 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, AMERIGAS PARTNERS -LP swung to a loss, reporting -$0.05 versus $1.51 in the prior year. This year, the market expects an improvement in earnings ($2.45 versus -$0.05).
- You can view the full AmeriGas Partners Ratings Report.