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." Alexandria Real Estate Equities (NYSE: ARE) shares currently have a dividend yield of 4.20%. Alexandria Real Estate Equities, Inc., a real estate investment trust (REIT), engages in the ownership, operation, management, development, acquisition, and redevelopment of properties for the life sciences industry. The company has a P/E ratio of 44.24. The average volume for Alexandria Real Estate Equities has been 441,500 shares per day over the past 30 days. Alexandria Real Estate Equities has a market cap of $4.6 billion and is part of the real estate industry. Shares are down 7.5% year to date as of the close of trading on Wednesday. TheStreet Ratings rates Alexandria Real Estate Equities as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- ARE's revenue growth has slightly outpaced the industry average of 9.5%. Since the same quarter one year prior, revenues rose by 11.0%. Growth in the company's revenue appears to have helped boost 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 80.2% when compared to the same quarter one year prior, rising from $17.48 million to $31.49 million.
- Net operating cash flow has slightly increased to $93.30 million or 9.93% when compared to the same quarter last year. In addition, ALEXANDRIA R E EQUITIES INC has also modestly surpassed the industry average cash flow growth rate of 8.52%.
- ALEXANDRIA R E EQUITIES INC has improved earnings per share by 45.8% 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, ALEXANDRIA R E EQUITIES INC reported lower earnings of $0.97 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.48 versus $0.97).
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ALEXANDRIA R E EQUITIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Alexandria Real Estate Equities Ratings Report.