Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 8.00%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric and electronic components, subassemblies, and finished products for original equipment manufacturers and contract manufacturers. The company has a P/E ratio of 16.67. The average volume for Highway Holdings has been 53,200 shares per day over the past 30 days. Highway Holdings has a market cap of $7.6 million and is part of the industrial industry. Shares are up 5.8% year to date as of the close of trading on Thursday. TheStreet Ratings rates Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, attractive valuation levels and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 15.8%. Since the same quarter one year prior, revenues rose by 11.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIHO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.50, which clearly demonstrates the ability to cover short-term cash needs.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Machinery industry average. The net income increased by 16.3% when compared to the same quarter one year prior, going from $0.13 million to $0.15 million.
- HIGHWAY HOLDINGS LTD has improved earnings per share by 33.3% 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 year. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.12 versus $0.05 in the prior year.
- You can view the full Highway Holdings Ratings Report.
- AFP PROVIDA SA reported significant earnings per share improvement 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, AFP PROVIDA SA increased its bottom line by earning $9.85 versus $6.87 in the prior year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 146.2% when compared to the same quarter one year prior, rising from $67.97 million to $167.35 million.
- 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 other companies in the Capital Markets industry and the overall market, AFP PROVIDA SA's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for AFP PROVIDA SA is rather high; currently it is at 65.39%. Regardless of PVD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PVD's net profit margin of 166.95% significantly outperformed against the industry.
- PVD, with its decline in revenue, slightly underperformed the industry average of 5.0%. Since the same quarter one year prior, revenues slightly dropped by 4.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Administradora de Fondos de Pensiones-Provi Ratings Report.
- Compared to where it was trading one year ago, CODI is up 29.81% to its most recent closing price of 18.07. 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 revenue growth came in higher than the industry average of 11.0%. Since the same quarter one year prior, revenues rose by 23.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.02, which illustrates the ability to avoid short-term cash problems.
- COMPASS DIVERSIFIED HOLDINGS reported significant earnings per share improvement 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, COMPASS DIVERSIFIED HOLDINGS continued to lose money by earning -$0.05 versus -$0.81 in the prior year. This year, the market expects an improvement in earnings ($1.77 versus -$0.05).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 302.8% when compared to the same quarter one year prior, rising from -$0.79 million to $1.59 million.
- You can view the full Compass Diversified Holdings Shares of Bene Ratings Report.
- Our dividend calendar.