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." Rayonier (NYSE: RYN) shares currently have a dividend yield of 4.40%. Rayonier, Inc. engages in the sale and development of real estate and timberland management, as well as in the production and sale of cellulose fibers in the United States, New Zealand, and Australia. The company has a P/E ratio of 17.58. The average volume for Rayonier has been 1,214,500 shares per day over the past 30 days. Rayonier has a market cap of $5.6 billion and is part of the materials & construction industry. Shares are up 6.1% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Rayonier as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 19.8%. 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. In comparison to the other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, RAYONIER INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- Net operating cash flow has significantly increased by 128.63% to $210.96 million when compared to the same quarter last year. In addition, RAYONIER INC has also vastly surpassed the industry average cash flow growth rate of -59.31%.
- The net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 5.4% when compared to the same quarter one year prior, going from $75.61 million to $79.70 million.
- RAYONIER INC has improved earnings per share by 8.5% 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, RAYONIER INC increased its bottom line by earning $2.54 versus $2.13 in the prior year. For the next year, the market is expecting a contraction of 25.2% in earnings ($1.90 versus $2.54).
- You can view the full Rayonier Ratings Report.