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." Old Republic International (NYSE: ORI) shares currently have a dividend yield of 4.60%. Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products primarily in the United States and Canada. The company has a P/E ratio of 12.57. The average volume for Old Republic International has been 1,554,600 shares per day over the past 30 days. Old Republic International has a market cap of $4.1 billion and is part of the insurance industry. Shares are down 9.9% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Old Republic International as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, attractive 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:
- The revenue growth came in higher than the industry average of 19.1%. Since the same quarter one year prior, revenues slightly increased by 3.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although ORI's debt-to-equity ratio of 0.15 is very low, it is currently higher than that of the industry average.
- Powered by its strong earnings growth of 512.50% and other important driving factors, this stock has surged by 31.57% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ORI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Net operating cash flow has slightly increased to $227.80 million or 8.63% when compared to the same quarter last year. In addition, OLD REPUBLIC INTL CORP has also vastly surpassed the industry average cash flow growth rate of -74.54%.
- You can view the full Old Republic International Ratings Report.
- The gross profit margin for CHIMERA INVESTMENT CORP is currently very high, coming in at 92.16%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 63.43% significantly outperformed against the industry average.
- CHIMERA INVESTMENT CORP reported flat earnings per share in the most recent 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, CHIMERA INVESTMENT CORP increased its bottom line by earning $0.32 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.40 versus $0.32).
- 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.
- CIM, with its decline in revenue, underperformed when compared the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 15.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
- You can view the full Chimera Investment Corporation Ratings Report.
- 38.03% is the gross profit margin for PPL CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -3.44% is in-line with the industry average.
- PPL CORP 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. 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, PPL CORP reported lower earnings of $1.74 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $1.74).
- PPL, with its decline in revenue, underperformed when compared the industry average of 3.4%. Since the same quarter one year prior, revenues slightly dropped by 8.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- In its most recent trading session, PPL 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 PPL Ratings Report.
- Our dividend calendar.