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 5 stocks with substantial yields, that ultimately, we have rated "Buy." Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 6.10%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and wealth management financial services. The company has a P/E ratio of 14.79. The average volume for Valley National Bancorp has been 1,242,400 shares per day over the past 30 days. Valley National Bancorp has a market cap of $2.1 billion and is part of the banking industry. Shares are up 13.7% year to date as of the close of trading on Tuesday. TheStreet Ratings rates Valley National Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins, increase in stock price during the past year, notable return on equity, attractive valuation levels and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. Highlights from the ratings report include:
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 75.69%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, VLY's net profit margin of 18.31% significantly trails the industry average.
- 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 Commercial Banks industry and the overall market on the basis of return on equity, VALLEY NATIONAL BANCORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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.
- VLY, with its decline in revenue, slightly underperformed the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- You can view the full Valley National Bancorp Ratings Report.