Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."GlaxoSmithKline (NYSE: GSK) shares currently have a dividend yield of 4.70%. GlaxoSmithKline plc, together with its subsidiaries, discovers, develops, manufactures, and markets pharmaceutical products, over-the-counter medicines, and health-related consumer products worldwide. The company has a P/E ratio of 15.91. The average volume for GlaxoSmithKline has been 2,459,600 shares per day over the past 30 days. GlaxoSmithKline has a market cap of $128.4 billion and is part of the drugs industry. Shares are up 21.5% year to date as of the close of trading on Tuesday. TheStreet Ratings rates GlaxoSmithKline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in stock price during the past year, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 2.5%. Since the same quarter one year prior, revenues slightly increased by 1.1%. 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 1166.38% to $3,647.01 million when compared to the same quarter last year. In addition, GLAXOSMITHKLINE PLC has also vastly surpassed the industry average cash flow growth rate of 30.01%.
- 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.
- The gross profit margin for GLAXOSMITHKLINE PLC is rather high; currently it is at 68.78%. Regardless of GSK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 14.80% trails the industry average.
- GLAXOSMITHKLINE PLC's earnings per share declined by 7.8% 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, GLAXOSMITHKLINE PLC reported lower earnings of $2.94 versus $3.21 in the prior year. This year, the market expects an improvement in earnings ($3.66 versus $2.94).
- You can view the full GlaxoSmithKline Ratings Report.
- Compared to other companies in the Biotechnology industry and the overall market, PDL BIOPHARMA INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- PDLI's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. 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.
- PDL BIOPHARMA INC has improved earnings per share by 12.5% 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, PDL BIOPHARMA INC increased its bottom line by earning $1.47 versus $1.15 in the prior year. This year, the market expects an improvement in earnings ($1.78 versus $1.47).
- Net operating cash flow has increased to $45.83 million or 27.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 1.70%.
- You can view the full PDL BioPharma Ratings Report.
- The revenue growth came in higher than the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 19.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 48.7% when compared to the same quarter one year prior, rising from $25.65 million to $38.12 million.
- Net operating cash flow has slightly increased to $97.25 million or 5.15% when compared to the same quarter last year. Despite an increase in cash flow, SENIOR HOUSING PPTYS TRUST's average is still marginally south of the industry average growth rate of 8.38%.
- SENIOR HOUSING PPTYS TRUST has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SENIOR HOUSING PPTYS TRUST reported lower earnings of $0.78 versus $1.02 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.78).
- You can view the full Senior Housing Properties Ratings Report.
- Our dividend calendar.