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." Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 6.60%. Regency Energy Partners LP engages in gathering, treating, processing, compressing, and transporting natural gas and natural gas liquids (NGLs). The company operates in Gathering and Processing, Natural Gas Transportation, NGL Services, and Contract Services segments. The average volume for Regency Energy Partners has been 695,600 shares per day over the past 30 days. Regency Energy Partners has a market cap of $5.7 billion and is part of the energy industry. Shares are up 29.1% year to date as of the close of trading on Thursday. TheStreet Ratings rates Regency Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Net operating cash flow has increased to $67.00 million or 19.49% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -26.07%.
- 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 10.8%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- REGENCY ENERGY PARTNERS LP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, REGENCY ENERGY PARTNERS LP reported lower earnings of $0.12 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus $0.12).
- RGP's debt-to-equity ratio of 0.66 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that RGP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.68 is low and demonstrates weak liquidity.
- You can view the full Regency Energy Partners Ratings Report.
- GA's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, GA has a quick ratio of 1.98, which demonstrates the ability of the company to cover short-term liquidity needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 95.27% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- GIANT INTERACTIVE GROUP -ADR has improved earnings per share by 10.5% 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. We feel that this trend should continue. During the past fiscal year, GIANT INTERACTIVE GROUP -ADR increased its bottom line by earning $0.65 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus $0.65).
- You can view the full Giant Interactive Group Ratings Report.
- The revenue growth greatly exceeded the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 34.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 88.9% when compared to the same quarter one year prior, rising from $99.70 million to $188.30 million.
- Net operating cash flow has increased to $319.60 million or 41.54% when compared to the same quarter last year. In addition, INTEGRYS ENERGY GROUP INC has also vastly surpassed the industry average cash flow growth rate of -20.57%.
- You can view the full Integrys Energy Group Ratings Report.
- Our dividend calendar.