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." Golar LNG (NASDAQ: GLNG) shares currently have a dividend yield of 5.00%. Golar LNG Limited, a midstream liquefied natural gas (LNG) company, engages in the transportation, regasification and liquefaction, and trading of LNG. The company has a P/E ratio of 3.08. The average volume for Golar LNG has been 648,300 shares per day over the past 30 days. Golar LNG has a market cap of $2.9 billion and is part of the transportation industry. Shares are up 0.2% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Golar LNG as a buy. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures 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:
- GLNG's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- GLNG, with its very weak revenue results, has greatly underperformed against the industry average of 5.6%. Since the same quarter one year prior, revenues plummeted by 85.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- GOLAR LNG LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GOLAR LNG LTD increased its bottom line by earning $11.66 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 96.5% in earnings ($0.41 versus $11.66).
- The share price of GOLAR LNG LTD has not done very well: it is down 5.22% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full Golar LNG Ratings Report.