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."People's United Financial (NASDAQ: PBCT) shares currently have a dividend yield of 4.40%. People's United Financial, Inc. operates as the bank holding company for People's United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. The company has a P/E ratio of 20.35. The average volume for People's United Financial has been 3,709,100 shares per day over the past 30 days. People's United Financial has a market cap of $4.7 billion and is part of the banking industry. Shares are up 23.3% year to date as of the close of trading on Thursday. TheStreet Ratings rates People's United Financial as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- PEOPLE'S UNITED FINL INC has improved earnings per share by 5.3% 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 two years. We feel that this trend should continue. During the past fiscal year, PEOPLE'S UNITED FINL INC increased its bottom line by earning $0.72 versus $0.57 in the prior year. This year, the market expects an improvement in earnings ($0.78 versus $0.72).
- The gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 88.58%. Regardless of PBCT'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 18.47% trails the industry average.
- The revenue fell significantly faster than the industry average of 107.0%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- 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. When compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, PEOPLE'S UNITED FINL INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full People's United Financial Ratings Report.
- APL's very impressive revenue growth greatly exceeded the industry average of 10.1%. Since the same quarter one year prior, revenues leaped by 109.5%. 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.
- Net operating cash flow has increased to $30.47 million or 39.85% when compared to the same quarter last year. In addition, ATLAS PIPELINE PARTNER LP has also vastly surpassed the industry average cash flow growth rate of -17.85%.
- 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.
- ATLAS PIPELINE PARTNER 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. 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, ATLAS PIPELINE PARTNER LP reported lower earnings of $0.97 versus $5.22 in the prior year. This year, the market expects an improvement in earnings ($1.52 versus $0.97).
- APL's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.
- You can view the full Atlas Pipeline Partners Ratings Report.
- WPC's very impressive revenue growth greatly exceeded the industry average of 10.6%. Since the same quarter one year prior, revenues leaped by 77.4%. 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, WPC's share price has jumped by 41.07%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WPC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The gross profit margin for W P CAREY INC is currently very high, coming in at 80.03%. It has increased significantly from the same period last year. Along with this, the net profit margin of 36.25% is above that of the industry average.
- W P CAREY INC's earnings per share declined by 27.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, W P CAREY INC reported lower earnings of $1.81 versus $3.71 in the prior year. This year, the market expects an improvement in earnings ($2.69 versus $1.81).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 35.8% when compared to the same quarter one year prior, rising from $31.78 million to $43.17 million.
- You can view the full W. P. Carey Ratings Report.
- Our dividend calendar.