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." AmeriGas Partners (NYSE: APU) shares currently have a dividend yield of 7.80%. AmeriGas Partners, L.P. operates as a retail and wholesale distributor of propane gas, and related equipment and supplies in the United States. The company has a P/E ratio of 20.02. The average volume for AmeriGas Partners has been 147,500 shares per day over the past 30 days. AmeriGas Partners has a market cap of $4.0 billion and is part of the utilities industry. Shares are up 11.9% year to date as of the close of trading on Friday. TheStreet Ratings rates AmeriGas Partners as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, compelling growth in net income, impressive record of earnings per share growth and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results. Highlights from the ratings report include:
- Since the same quarter one year prior, revenues slightly increased by 4.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was trading one year ago, APU is up 6.72% to its most recent closing price of 42.85. Looking ahead, although the push and pull of a bull or bear market could certainly alter the outcome, our view is that this stock's positive fundamentals give it good potential for further appreciation.
- The net income increased by 28.9% when compared to the same quarter one year prior, rising from -$76.00 million to -$54.06 million.
- AMERIGAS PARTNERS -LP has improved earnings per share by 26.7% 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, AMERIGAS PARTNERS -LP turned its bottom line around by earning $1.43 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($2.81 versus $1.43).
- 35.66% is the gross profit margin for AMERIGAS PARTNERS -LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year.
- You can view the full AmeriGas Partners Ratings Report.