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 4 stocks with substantial yields, that ultimately, we have rated "Buy." Macquarie Infrastructure Company (NYSE: MIC) shares currently have a dividend yield of 6.60%. Macquarie Infrastructure Company LLC, through its subsidiaries, owns, operates, and invests in a diversified group of infrastructure businesses in the United States. The company has a P/E ratio of 531.10. The average volume for Macquarie Infrastructure Company has been 325,200 shares per day over the past 30 days. Macquarie Infrastructure Company has a market cap of $2.8 billion and is part of the wholesale industry. Shares are up 16.6% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Macquarie Infrastructure Company 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, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- MIC's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 1.7%. 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 Transportation Infrastructure industry. The net income increased by 653.9% when compared to the same quarter one year prior, rising from -$1.88 million to $10.41 million.
- Net operating cash flow has increased to $50.66 million or 27.44% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.36%.
- 41.57% is the gross profit margin for MACQUARIE INFRASTRUCT CO LLC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MIC's net profit margin of 3.94% significantly trails the industry average.
- MACQUARIE INFRASTRUCT CO LLC reported significant earnings per share improvement 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, MACQUARIE INFRASTRUCT CO LLC reported lower earnings of $0.29 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.74 versus $0.29).
- You can view the full Macquarie Infrastructure Company Ratings Report.