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 5 stocks with substantial yields, that ultimately, we have rated "Buy." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.70%. Consolidated Edison, Inc., through its subsidiaries, engages in regulated electric, gas, and steam delivery businesses. The company has a P/E ratio of 15.39. The average volume for Consolidated Edison has been 2,044,400 shares per day over the past 30 days. Consolidated Edison has a market cap of $15.8 billion and is part of the utilities industry. Shares are down 2.9% year-to-date as of the close of trading on Monday. TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, growth in earnings per share and increase in net income. 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:
- The revenue growth greatly exceeded the industry average of 31.9%. Since the same quarter one year prior, revenues slightly increased by 1.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CONSOLIDATED EDISON INC has improved earnings per share by 6.0% 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 two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CONSOLIDATED EDISON INC increased its bottom line by earning $3.86 versus $3.57 in the prior year. For the next year, the market is expecting a contraction of 2.8% in earnings ($3.75 versus $3.86).
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Multi-Utilities industry average. The net income increased by 5.5% when compared to the same quarter one year prior, going from $440.00 million to $464.00 million.
- The gross profit margin for CONSOLIDATED EDISON INC is currently lower than what is desirable, coming in at 31.95%. Regardless of ED's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.31% trails the industry average.
- You can view the full Consolidated Edison Ratings Report.