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." CVR Energy (NYSE: CVI) shares currently have a dividend yield of 8.30%. CVR Energy, Inc., through its subsidiaries, engages in petroleum refining and nitrogen fertilizer manufacturing activities in the United States. The company operates through two segments, Petroleum and Nitrogen Fertilizer. The company has a P/E ratio of 7.26. The average volume for CVR Energy has been 537,300 shares per day over the past 30 days. CVR Energy has a market cap of $3.1 billion and is part of the energy industry. Shares are down 25.4% year to date as of the close of trading on Thursday. TheStreet Ratings rates CVR Energy as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels 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:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CVR ENERGY INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Despite currently having a low debt-to-equity ratio of 0.53, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CVI's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.97 is high and demonstrates strong liquidity.
- CVI, with its decline in revenue, underperformed when compared the industry average of 5.5%. Since the same quarter one year prior, revenues fell by 17.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CVR ENERGY INC has experienced 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, CVR ENERGY INC increased its bottom line by earning $4.33 versus $3.94 in the prior year. For the next year, the market is expecting a contraction of 11.4% in earnings ($3.83 versus $4.33).
- You can view the full CVR Energy Ratings Report.
- Net operating cash flow has significantly increased by 355.55% to $23.00 million when compared to the same quarter last year. In addition, CMS ENERGY CORP has also vastly surpassed the industry average cash flow growth rate of 24.26%.
- 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 Multi-Utilities industry and the overall market on the basis of return on equity, CMS ENERGY CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- 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.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.4%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- CMS ENERGY CORP's earnings per share declined by 16.4% 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, CMS ENERGY CORP reported lower earnings of $1.39 versus $1.57 in the prior year. This year, the market expects an improvement in earnings ($1.65 versus $1.39).
- You can view the full CMS Energy Ratings Report.
- CORRECTIONS CORP AMER has improved earnings per share by 7.1% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, CORRECTIONS CORP AMER increased its bottom line by earning $1.56 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.87 versus $1.56).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 22.4% when compared to the same quarter one year prior, going from $42.34 million to $51.84 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CORRECTIONS CORP AMER's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- CXW, with its decline in revenue, underperformed when compared the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Corrections Corporation of America Ratings Report.
- Our dividend calendar.