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 5 stocks with substantial yields, that ultimately, we have rated "Buy." Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.40%. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 17.57. The average volume for Rayonier has been 1,017,900 shares per day over the past 30 days. Rayonier has a market cap of $5.6 billion and is part of the materials & construction industry. Shares are down 15.4% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Rayonier as a buy. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- 39.19% is the gross profit margin for RAYONIER INC which we consider to be strong. Regardless of RYN'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 14.90% trails the industry average.
- RAYONIER INC's earnings per share declined by 27.9% 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, RAYONIER INC reported lower earnings of $2.13 versus $2.20 in the prior year. This year, the market expects an improvement in earnings ($2.27 versus $2.13).
- RYN, with its decline in revenue, slightly underperformed the industry average of 9.5%. Since the same quarter one year prior, revenues slightly dropped by 0.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The share price of RAYONIER INC has not done very well: it is down 7.55% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Rayonier Ratings Report.