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." EPR Properties (NYSE: EPR) shares currently have a dividend yield of 6.90%. EPR Properties, a real estate investment trust (REIT), develops, owns, leases, and finances entertainment and related properties in the United States and Canada. Its properties include megaplex theatres, entertainment retail centers, and destination recreational and specialty properties. The company has a P/E ratio of 20.80. The average volume for EPR Properties has been 277,800 shares per day over the past 30 days. EPR Properties has a market cap of $2.6 billion and is part of the real estate industry. Shares are up 2.4% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates EPR Properties as a buy. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- EPR PROPERTIES has improved earnings per share by 8.9% 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, EPR PROPERTIES increased its bottom line by earning $2.29 versus $1.62 in the prior year. This year, the market expects an improvement in earnings ($2.80 versus $2.29).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry average. The net income increased by 27.4% when compared to the same quarter one year prior, rising from $34.15 million to $43.50 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $45.65 million or 8.78% when compared to the same quarter last year. In addition, EPR PROPERTIES has also modestly surpassed the industry average cash flow growth rate of -0.44%.
- You can view the full EPR Properties Ratings Report.
- 45.30% is the gross profit margin for AMEREN CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.43% is above that of the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The debt-to-equity ratio is somewhat low, currently at 0.92, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.23 is very weak and demonstrates a lack of ability to pay short-term obligations.
- AMEREN CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AMEREN CORP swung to a loss, reporting -$2.67 versus $2.14 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus -$2.67).
- AEE, with its decline in revenue, slightly underperformed the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 4.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Ameren Ratings Report.
- BX's very impressive revenue growth greatly exceeded the industry average of 15.2%. Since the same quarter one year prior, revenues leaped by 122.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for BLACKSTONE GROUP LP is rather high; currently it is at 51.92%. It has increased significantly from the same period last year. Along with this, the net profit margin of 22.92% is above that of the industry average.
- Powered by its strong earnings growth of 447.36% and other important driving factors, this stock has surged by 84.80% 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, BX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- BLACKSTONE GROUP LP reported significant earnings per share improvement 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, BLACKSTONE GROUP LP increased its bottom line by earning $1.98 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($2.98 versus $1.98).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 483.8% when compared to the same quarter one year prior, rising from $106.41 million to $621.26 million.
- You can view the full Blackstone Group Ratings Report.
- Our dividend calendar.