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." Highway Holdings (NASDAQ: HIHO) shares currently have a dividend yield of 7.80%. Highway Holdings Limited, through its subsidiaries, manufactures and sells metal, plastic, electric and electronic components, subassemblies, and finished products for original equipment manufacturers and contract manufacturers. The company has a P/E ratio of 17.05. The average volume for Highway Holdings has been 12,600 shares per day over the past 30 days. Highway Holdings has a market cap of $7.7 million and is part of the industrial industry. Shares are up 8.3% year to date as of the close of trading on Friday. TheStreet Ratings rates Highway Holdings as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, attractive valuation levels and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 17.8%. Since the same quarter one year prior, revenues rose by 11.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIHO's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.50, which clearly demonstrates the ability to cover short-term cash needs.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Machinery industry average. The net income increased by 16.3% when compared to the same quarter one year prior, going from $0.13 million to $0.15 million.
- HIGHWAY HOLDINGS LTD has improved earnings per share by 33.3% 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 year. During the past fiscal year, HIGHWAY HOLDINGS LTD increased its bottom line by earning $0.12 versus $0.05 in the prior year.
- You can view the full Highway Holdings Ratings Report.
- AB's very impressive revenue growth greatly exceeded the industry average of 12.5%. Since the same quarter one year prior, revenues leaped by 63.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 90.47% and other important driving factors, this stock has surged by 28.65% 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, AB should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- ALLIANCEBERNSTEIN HOLDING 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 year. We feel that this trend should continue. During the past fiscal year, ALLIANCEBERNSTEIN HOLDING LP turned its bottom line around by earning $0.50 versus -$0.95 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $0.50).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 88.7% when compared to the same quarter one year prior, rising from $21.34 million to $40.28 million.
- Net operating cash flow has increased to $40.28 million or 42.79% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.76%.
- You can view the full AllianceBernstein Holding L.P Ratings Report.
- The revenue growth greatly exceeded the industry average of 6.6%. Since the same quarter one year prior, revenues rose by 24.6%. 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 significantly increased by 149.41% to $68.50 million when compared to the same quarter last year. In addition, CALUMET SPECIALTY PRODS -LP has also vastly surpassed the industry average cash flow growth rate of -15.78%.
- CLMT's debt-to-equity ratio of 0.67 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.
- CALUMET SPECIALTY PRODS -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. 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, CALUMET SPECIALTY PRODS -LP increased its bottom line by earning $3.53 versus $0.89 in the prior year. For the next year, the market is expecting a contraction of 66.4% in earnings ($1.19 versus $3.53).
- You can view the full Calumet Specialty Products Partners Ratings Report.
- Our dividend calendar.