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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.30%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 37.25. The average volume for Mid-America Apartment Communities has been 394,900 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $2.8 billion and is part of the real estate industry. Shares are down 2.2% year to date as of the close of trading on Friday. TheStreet Ratings rates Mid-America Apartment Communities as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, compelling growth in net income, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- MAA's revenue growth has slightly outpaced the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MID-AMERICA APT CMNTYS INC has improved earnings per share by 5.5% 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, MID-AMERICA APT CMNTYS INC increased its bottom line by earning $1.55 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $1.55).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 109.8% when compared to the same quarter one year prior, rising from $28.15 million to $59.05 million.
- The gross profit margin for MID-AMERICA APT CMNTYS INC is currently lower than what is desirable, coming in at 28.60%. Regardless of MAA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MAA's net profit margin of 44.00% significantly outperformed against the industry.
- 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, MID-AMERICA APT CMNTYS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Mid-America Apartment Communities Ratings Report.
- The revenue growth came in higher than the industry average of 6.4%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 88.8% when compared to the same quarter one year prior, rising from $1,763.99 million to $3,330.46 million.
- The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that TOT's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
- 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. 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.
- You can view the full Total Ratings Report.
- The revenue growth came in higher than the industry average of 10.8%. Since the same quarter one year prior, revenues rose by 22.3%. Growth in the company's revenue appears to have helped boost the 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. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, OMEGA HEALTHCARE INVS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for OMEGA HEALTHCARE INVS INC is rather high; currently it is at 63.15%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 47.84% significantly outperformed against the industry average.
- Net operating cash flow has increased to $63.73 million or 41.99% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.47%.
- Powered by its strong earnings growth of 44.82% and other important driving factors, this stock has surged by 26.32% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, OHI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full Omega Healthcare Investors Ratings Report.
- Net operating cash flow has significantly increased by 90.73% to $92.55 million when compared to the same quarter last year. In addition, MARKWEST ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -15.63%.
- The gross profit margin for MARKWEST ENERGY PARTNERS LP is rather high; currently it is at 52.18%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MWE's net profit margin of 20.16% significantly outperformed against the industry.
- Compared to its closing price of one year ago, MWE's share price has jumped by 29.19%, exceeding the performance of the broader market during that same time frame. 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.4%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MWE's debt-to-equity ratio of 1.00 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 0.74 is weak.
- You can view the full MarkWest Energy Partners Ratings Report.
- Our dividend calendar.