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." Macquarie Infrastructure Company (NYSE: MIC) shares currently have a dividend yield of 6.60%. Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in a diversified group of infrastructure businesses in the United States. The average volume for Macquarie Infrastructure Company has been 265,000 shares per day over the past 30 days. Macquarie Infrastructure Company has a market cap of $2.8 billion and is part of the wholesale industry. Shares are up 16.4% year to date as of the close of trading on Thursday. TheStreet Ratings rates Macquarie Infrastructure Company as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Compared to its closing price of one year ago, MIC's share price has jumped by 30.14%, 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.
- 40.84% is the gross profit margin for MACQUARIE INFRASTRUCT CO LLC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.33% is in-line with the industry average.
- MACQUARIE INFRASTRUCT CO LLC 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, MACQUARIE INFRASTRUCT CO LLC reported lower earnings of $0.29 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $0.29).
- MIC, with its decline in revenue, slightly underperformed the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MIC's debt-to-equity ratio of 0.98 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 1.39 is sturdy.
- You can view the full Macquarie Infrastructure Company Ratings Report.
- The gross profit margin for CHIMERA INVESTMENT CORP is currently very high, coming in at 89.93%. Regardless of CIM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CIM's net profit margin of 53.60% significantly outperformed against the industry.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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.
- CHIMERA INVESTMENT CORP's earnings per share declined by 20.0% 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 year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CHIMERA INVESTMENT CORP reported lower earnings of $0.13 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($0.39 versus $0.13).
- CIM, with its decline in revenue, underperformed when compared the industry average of 10.8%. Since the same quarter one year prior, revenues fell by 13.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Chimera Investment Corporation Ratings Report.
- HIGHWOODS PROPERTIES INC has improved earnings per share by 38.5% 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 year. We feel that this trend should continue. During the past fiscal year, HIGHWOODS PROPERTIES INC increased its bottom line by earning $0.59 versus $0.41 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.59).
- 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 107.1% when compared to the same quarter one year prior, rising from $13.59 million to $28.15 million.
- 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 8.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 Highwoods Properties Ratings Report.
- Our dividend calendar.