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." Macerich Company (NYSE: MAC) shares currently have a dividend yield of 4.20%. The Macerich Company is an independent real estate investment trust. The firm invests in the real estate markets of the United States. The company has a P/E ratio of 24.78. The average volume for Macerich Company has been 895,300 shares per day over the past 30 days. Macerich Company has a market cap of $8.3 billion and is part of the real estate industry. Shares are up 0.2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Macerich Company as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. 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 revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 35.4%. 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 $146.07 million or 30.90% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 8.55%.
- MACERICH CO's earnings per share declined by 9.7% 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, MACERICH CO increased its bottom line by earning $1.92 versus $1.73 in the prior year. This year, the market expects an improvement in earnings ($2.21 versus $1.92).
- 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. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, MACERICH CO's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Macerich Company Ratings Report.