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."Sun Life Financial (NYSE: SLF) shares currently have a dividend yield of 4.40%. Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers. The company has a P/E ratio of 14.06. The average volume for Sun Life Financial has been 364,500 shares per day over the past 30 days. Sun Life Financial has a market cap of $19.1 billion and is part of the insurance industry. Shares are up 19.2% year to date as of the close of trading on Thursday. TheStreet Ratings rates Sun Life Financial as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, notable return on equity, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- Since the same quarter one year prior, revenues rose by 19.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Net operating cash flow has significantly increased by 229.25% to $972.00 million when compared to the same quarter last year.
- 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 where it was trading one year ago, SLF is up 52.99% to its most recent closing price of 32.39. 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 current debt-to-equity ratio, 0.33, is low and is below the industry average, implying that there has been successful management of debt levels.
- You can view the full Sun Life Financial Ratings Report.
- 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 Hotels, Restaurants & Leisure industry and the overall market, SIX FLAGS ENTERTAINMENT CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- SIX's share price has surged by 28.05% over the past year, reflecting the market's general trend, despite their weak earnings growth during the last quarter. 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.
- The gross profit margin for SIX FLAGS ENTERTAINMENT CORP is rather high; currently it is at 57.85%. Regardless of SIX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.02% trails the industry average.
- SIX, with its decline in revenue, slightly underperformed the industry average of 3.7%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- SIX FLAGS ENTERTAINMENT CORP's earnings per share declined by 26.0% in the most recent quarter compared to 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, SIX FLAGS ENTERTAINMENT CORP turned its bottom line around by earning $3.04 versus -$0.25 in the prior year. For the next year, the market is expecting a contraction of 63.0% in earnings ($1.13 versus $3.04).
- You can view the full Six Flags Entertainment Ratings Report.
- The revenue growth came in higher than the industry average of 6.2%. Since the same quarter one year prior, revenues slightly increased by 6.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BUCKEYE PARTNERS LP 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, BUCKEYE PARTNERS LP increased its bottom line by earning $2.31 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($3.41 versus $2.31).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 71.9% when compared to the same quarter one year prior, rising from $51.96 million to $89.34 million.
- Powered by its strong earnings growth of 59.25% and other important driving factors, this stock has surged by 32.08% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- Net operating cash flow has remained constant at $182.42 million with no significant change when compared to the same quarter last year. Even though BUCKEYE PARTNERS LP's cash flow growth was minimal, the firm managed to surpass its industry's average growth rate of -86.32%.
- You can view the full Buckeye Partners L.P Ratings Report.
- Our dividend calendar.