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." KKR (NYSE: KKR) shares currently have a dividend yield of 8.30%. Kohlberg Kravis Roberts & Co. is a private equity investment firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, and middle market investments. The company has a P/E ratio of 13.12. The average volume for KKR has been 2,307,700 shares per day over the past 30 days. KKR has a market cap of $5.3 billion and is part of the financial services industry. Shares are up 32.6% year to date as of the close of trading on Thursday. TheStreet Ratings rates KKR as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- KKR's very impressive revenue growth greatly exceeded the industry average of 5.0%. Since the same quarter one year prior, revenues leaped by 79.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, KKR's share price has jumped by 46.85%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- 42.05% is the gross profit margin for KKR & CO LP which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, KKR's net profit margin of 3.00% significantly trails the industry average.
- KKR & CO 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. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KKR & CO LP increased its bottom line by earning $2.23 versus $0.04 in the prior year. For the next year, the market is expecting a contraction of 5.2% in earnings ($2.12 versus $2.23).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 89.7% when compared to the same quarter one year ago, falling from $146.26 million to $15.13 million.
- You can view the full KKR Ratings Report.
- RDS.B's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.82 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- ROYAL DUTCH SHELL PLC 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, ROYAL DUTCH SHELL PLC reported lower earnings of $8.50 versus $9.94 in the prior year. This year, the market expects an improvement in earnings ($16.40 versus $8.50).
- The gross profit margin for ROYAL DUTCH SHELL PLC is currently extremely low, coming in at 14.88%. Regardless of RDS.B's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.54% trails the industry average.
- You can view the full Royal Dutch Shell Ratings Report.
- LXP's revenue growth has slightly outpaced the industry average of 7.0%. Since the same quarter one year prior, revenues rose by 13.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- This stock has managed to rise its share value by 39.97% over the past twelve months. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LXP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has increased to $57.13 million or 30.44% when compared to the same quarter last year. In addition, LEXINGTON REALTY TRUST has also vastly surpassed the industry average cash flow growth rate of -81.00%.
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, LEXINGTON REALTY TRUST's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Lexington Realty Ratings Report.
- Our dividend calendar.