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." BCE (NYSE: BCE) shares currently have a dividend yield of 5.60%. BCE Inc. provides communications solutions to residential, business, and wholesale customers primarily in Canada. The company has a P/E ratio of 12.01. The average volume for BCE has been 909,100 shares per day over the past 30 days. BCE has a market cap of $31.8 billion and is part of the telecommunications industry. Shares are down 4.9% year to date as of the close of trading on Wednesday. TheStreet Ratings rates BCE as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- BCE's revenue growth has slightly outpaced the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 0.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BCE INC has improved earnings per share by 5.8% 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. During the past fiscal year, BCE INC increased its bottom line by earning $3.34 versus $2.87 in the prior year.
- 48.75% is the gross profit margin for BCE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 12.17% is above that of 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 Diversified Telecommunication Services industry and the overall market on the basis of return on equity, BCE INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The net income growth from the same quarter one year ago has exceeded that of the Diversified Telecommunication Services industry average, but is less than that of the S&P 500. The net income increased by 5.8% when compared to the same quarter one year prior, going from $566.00 million to $599.00 million.
- You can view the full BCE Ratings Report.