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.