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."ONEOK Partners L.P (NYSE: OKS) shares currently have a dividend yield of 5.40%. ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. It operates in three segments: Natural Gas Gathering and Processing, Natural Gas Pipelines, and Natural Gas Liquids. The company has a P/E ratio of 23.12. The average volume for ONEOK Partners L.P has been 361,300 shares per day over the past 30 days. ONEOK Partners L.P has a market cap of $8.6 billion and is part of the energy industry. Shares are up 0.2% year to date as of the close of trading on Tuesday. TheStreet Ratings rates ONEOK Partners L.P as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 23.1%. 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 increased to $270.66 million or 42.04% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 0.99%.
- The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 6.9% when compared to the same quarter one year ago, dropping from $232.28 million to $216.31 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, ONEOK PARTNERS -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for ONEOK PARTNERS -LP is currently extremely low, coming in at 9.61%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.90% is above that of the industry average.
- You can view the full ONEOK Partners L.P Ratings Report.
- PEG's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 40.13% is the gross profit margin for PUBLIC SERVICE ENTRP GRP INC 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 15.27% trails the industry average.
- Net operating cash flow has increased to $1,092.00 million or 17.04% when compared to the same quarter last year. Despite an increase in cash flow, PUBLIC SERVICE ENTRP GRP INC's average is still marginally south of the industry average growth rate of 26.46%.
- The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
- You can view the full Public Service Enterprise Group Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 66.5% when compared to the same quarter one year prior, rising from $35.42 million to $58.97 million.
- GLNG's debt-to-equity ratio is very low at 0.21 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 49.54% is the gross profit margin for GOLAR LNG LTD which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, GLNG's net profit margin of 211.16% significantly outperformed against the industry.
- GOLAR LNG LTD 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GOLAR LNG LTD increased its bottom line by earning $11.66 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 94.1% in earnings ($0.69 versus $11.66).
- You can view the full Golar LNG Ratings Report.
- Our dividend calendar.