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." Camden Property (NYSE: CPT) shares currently have a dividend yield of 4.20%. Camden Property Trust is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, development, acquisition, management, and disposition of multifamily residential apartment communities. The company has a P/E ratio of 37.11. The average volume for Camden Property has been 578,400 shares per day over the past 30 days. Camden Property has a market cap of $5.3 billion and is part of the real estate industry. Shares are up 11.7% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Camden Property as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 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 0.8%. 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.
- CAMDEN PROPERTY TRUST's earnings per share declined by 30.3% in the most recent quarter compared to the same quarter a year ago. 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, CAMDEN PROPERTY TRUST reported lower earnings of $1.71 versus $1.82 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $1.71).
- The share price of CAMDEN PROPERTY TRUST has not done very well: it is down 12.75% 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- The gross profit margin for CAMDEN PROPERTY TRUST is currently lower than what is desirable, coming in at 29.28%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 61.48% has significantly outperformed against the industry average.
- You can view the full Camden Property Ratings Report.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Multi-Utilities industry. The net income increased by 1410.0% when compared to the same quarter one year prior, rising from $10.00 million to $151.00 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- CENTERPOINT ENERGY INC reported significant earnings per share improvement 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, CENTERPOINT ENERGY INC reported lower earnings of $0.96 versus $1.80 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus $0.96).
- CNP, with its decline in revenue, slightly underperformed the industry average of 0.2%. Since the same quarter one year prior, revenues slightly dropped by 3.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full CenterPoint Energy Ratings Report.
- GA's revenue growth has slightly outpaced the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 11.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- GA's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, GA has a quick ratio of 2.18, which demonstrates the ability of the company to cover short-term liquidity needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 77.47% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, GA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- GIANT INTERACTIVE GROUP -ADR has improved earnings per share by 15.0% 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 year. We feel that this trend should continue. During the past fiscal year, GIANT INTERACTIVE GROUP -ADR increased its bottom line by earning $0.65 versus $0.59 in the prior year. This year, the market expects an improvement in earnings ($0.93 versus $0.65).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 17.2% when compared to the same quarter one year prior, going from $49.59 million to $58.13 million.
- You can view the full Giant Interactive Group Ratings Report.
- Our dividend calendar.