Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.
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."Ventas (NYSE: VTR) shares currently have a dividend yield of 4.70%. Ventas, Inc. is a publicly owned real estate investment trust. The firm engages in investment, management, financing, and leasing of properties in the healthcare industry. It invests in the real estate markets of the United States and Canada. The company has a P/E ratio of 37.04. The average volume for Ventas has been 1,890,000 shares per day over the past 30 days. Ventas has a market cap of $18.1 billion and is part of the real estate industry. Shares are up 8.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Ventas as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- VTR's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- VENTAS INC has improved earnings per share by 8.8% 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 year. We feel that this trend should continue. During the past fiscal year, VENTAS INC increased its bottom line by earning $1.66 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.77 versus $1.66).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 25.7% when compared to the same quarter one year prior, rising from $86.27 million to $108.44 million.
- Net operating cash flow has increased to $359.33 million or 26.74% when compared to the same quarter last year. In addition, VENTAS INC has also vastly surpassed the industry average cash flow growth rate of -76.73%.
- You can view the full Ventas Ratings Report.
- GLNG's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOLAR LNG LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- GLNG, with its very weak revenue results, has greatly underperformed against the industry average of 3.3%. Since the same quarter one year prior, revenues plummeted by 85.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- GOLAR LNG LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, GOLAR LNG LTD increased its bottom line by earning $11.66 versus $0.61 in the prior year. For the next year, the market is expecting a contraction of 96.6% in earnings ($0.40 versus $11.66).
- The share price of GOLAR LNG LTD has not done very well: it is down 7.51% 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. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it is one of the factors that makes this stock an attractive investment.
- You can view the full Golar LNG Ratings Report.
- The revenue growth greatly exceeded the industry average of 16.9%. Since the same quarter one year prior, revenues rose by 29.5%. 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 gross profit margin for ARES CAPITAL CORP is currently very high, coming in at 70.76%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 57.04% significantly outperformed against the industry average.
- 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 Capital Markets industry and the overall market on the basis of return on equity, ARES CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- In its most recent trading session, ARCC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- You can view the full Ares Capital Corporation Ratings Report.
- Our dividend calendar.