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." LaSalle Hotel Properties (NYSE: LHO) shares currently have a dividend yield of 4.20%. LaSalle Hotel Properties, a real estate investment trust (REIT), engages in the purchase, ownership, redevelopment, and leasing of primarily upscale and luxury full-service hotels in convention, resort, and urban business markets in the United States. The company has a P/E ratio of 37.73. The average volume for LaSalle Hotel Properties has been 767,300 shares per day over the past 30 days. LaSalle Hotel Properties has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 5.2% year to date as of the close of trading on Thursday. TheStreet Ratings rates LaSalle Hotel Properties as a buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, reasonable valuation levels, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- LASALLE HOTEL PROPERTIES has improved earnings per share by 27.6% 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, LASALLE HOTEL PROPERTIES increased its bottom line by earning $0.52 versus $0.11 in the prior year. This year, the market expects an improvement in earnings ($0.80 versus $0.52).
- Despite its growing revenue, the company underperformed as compared with the industry average of 10.8%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has remained constant at $73.73 million with no significant change when compared to the same quarter last year. This quarter, LASALLE HOTEL PROPERTIES's cash flow growth rate has remained relatively unchanged and is slightly below 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, LASALLE HOTEL PROPERTIES's return on equity is below that of both the industry average and the S&P 500.
- You can view the full LaSalle Hotel Properties Ratings Report.