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." TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.70%. TAL International Group, Inc. engages in leasing intermodal containers and chassis worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 9.60. The average volume for TAL International Group has been 568,300 shares per day over the past 30 days. TAL International Group has a market cap of $1.4 billion and is part of the diversified services industry. Shares are down 24.7% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, attractive valuation levels, growth in earnings per share and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- TAL INTERNATIONAL GROUP INC has improved earnings per share by 10.8% 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, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $3.87 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $3.87).
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.2%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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. Compared to other companies in the Trading Companies & Distributors industry and the overall market, TAL INTERNATIONAL GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $116.24 million or 38.48% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.91%.
- You can view the full TAL International Group Ratings Report.
- EPB's revenue growth has slightly outpaced the industry average of 1.4%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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.
- 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 Oil, Gas & Consumable Fuels industry and the overall market, EL PASO PIPELINE PARTNERS LP's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- Net operating cash flow has increased to $233.00 million or 18.27% when compared to the same quarter last year. In addition, EL PASO PIPELINE PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -44.35%.
- The gross profit margin for EL PASO PIPELINE PARTNERS LP is currently very high, coming in at 70.73%. Regardless of EPB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPB's net profit margin of 38.21% significantly outperformed against the industry.
- You can view the full El Paso Pipeline Partners Ratings Report.
- WESTAR ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. 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, WESTAR ENERGY INC increased its bottom line by earning $2.14 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.25 versus $2.14).
- 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. Compared to other companies in the Electric Utilities industry and the overall market on the basis of return on equity, WESTAR ENERGY INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- 42.17% is the gross profit margin for WESTAR ENERGY INC which we consider to be strong. Regardless of WR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WR's net profit margin of 19.15% compares favorably to the industry average.
- WR, with its decline in revenue, slightly underperformed the industry average of 0.4%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full Westar Energy Ratings Report.
- Our dividend calendar.