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." Mid-America Apartment Communities (NYSE: MAA) shares currently have a dividend yield of 4.70%. Mid-America Apartment Communities, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in acquisition, redevelopment, new development, property management, and disposition of multifamily apartment communities. The company has a P/E ratio of 35.40. The average volume for Mid-America Apartment Communities has been 508,300 shares per day over the past 30 days. Mid-America Apartment Communities has a market cap of $4.6 billion and is part of the real estate industry. Shares are up 2.2% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Mid-America Apartment Communities as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, compelling growth in net income, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- MAA's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 10.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- MID-AMERICA APT CMNTYS INC has improved earnings per share by 8.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MID-AMERICA APT CMNTYS INC increased its bottom line by earning $1.45 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $1.45).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 43.5% when compared to the same quarter one year prior, rising from $30.85 million to $44.26 million.
- Net operating cash flow has slightly increased to $59.40 million or 1.95% when compared to the same quarter last year. Despite an increase in cash flow, MID-AMERICA APT CMNTYS INC's average is still marginally south of the industry average growth rate of 8.56%.
- 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, MID-AMERICA APT CMNTYS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full Mid-America Apartment Communities Ratings Report.