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." Icahn (NASDAQ: IEP) shares currently have a dividend yield of 4.20%. Icahn Enterprises L.P. engages in the investment, automotive, gaming, railcar, food packaging, metals, real estate, and home fashion businesses in the United States and internationally. Its Investment segment provides investment advisory, and administrative and back office services. The company has a P/E ratio of 16.38. The average volume for Icahn has been 335,900 shares per day over the past 30 days. Icahn has a market cap of $13.5 billion and is part of the conglomerates industry. Shares are up 164.9% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Icahn as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, attractive valuation levels, expanding profit margins and compelling growth in net income. 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:
- IEP's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 20.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 400.00% and other important driving factors, this stock has surged by 201.66% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, IEP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Auto Components industry. The net income increased by 461.9% when compared to the same quarter one year prior, rising from $84.00 million to $472.00 million.
- 35.09% is the gross profit margin for ICAHN ENTERPRISES LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 8.37% is above that of the industry average.
- You can view the full Icahn Ratings Report.