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." Liberty Property (NYSE: LRY) shares currently have a dividend yield of 5.40%. Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 34.07. The average volume for Liberty Property has been 966,300 shares per day over the past 30 days. Liberty Property has a market cap of $5.1 billion and is part of the real estate industry. Shares are up 3.6% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- LRY's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 11.8%. 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.
- 35.40% is the gross profit margin for LIBERTY PROPERTY TRUST which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 15.37% trails the industry average.
- LIBERTY PROPERTY TRUST's earnings per share declined by 12.5% 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, LIBERTY PROPERTY TRUST increased its bottom line by earning $1.02 versus $0.99 in the prior year. This year, the market expects an improvement in earnings ($1.35 versus $1.02).
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 3.2% when compared to the same quarter one year prior, going from $27.81 million to $28.70 million.
- You can view the full Liberty Property Ratings Report.