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." Liberty Property (NYSE: LRY) shares currently have a dividend yield of 5.10%. Liberty Property Trust is a publicly owned real estate investment holding trust. Through its subsidiary, it provides leasing, property management, development, acquisition, and other tenant-related services for a portfolio of industrial and office properties. The company has a P/E ratio of 52.76. The average volume for Liberty Property has been 1,086,100 shares per day over the past 30 days. Liberty Property has a market cap of $5.4 billion and is part of the real estate industry. Shares are up 9% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Liberty Property as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 33.7%. 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 net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 81.3% when compared to the same quarter one year prior, rising from $38.43 million to $69.69 million.
- LIBERTY PROPERTY TRUST's earnings per share declined by 31.6% 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 two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LIBERTY PROPERTY TRUST reported lower earnings of $0.70 versus $0.76 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus $0.70).
- The share price of LIBERTY PROPERTY TRUST has not done very well: it is down 6.42% 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 LIBERTY PROPERTY TRUST is currently lower than what is desirable, coming in at 28.83%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 35.38% is above that of the industry average.
- You can view the full Liberty Property Ratings Report.