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."Regency Energy Partners (NYSE: RGP) shares currently have a dividend yield of 7.10%. Regency Energy Partners LP engages in gathering, treating, processing, compressing, and transporting natural gas and natural gas liquids (NGLs). The company operates in Gathering and Processing, Natural Gas Transportation, NGL Services, and Contract Services segments. The company has a P/E ratio of 157.29. The average volume for Regency Energy Partners has been 602,400 shares per day over the past 30 days. Regency Energy Partners has a market cap of $5.7 billion and is part of the energy industry. Shares are up 1.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Regency Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. 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 3.8%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 Oil, Gas & Consumable Fuels industry. The net income increased by 87.5% when compared to the same quarter one year prior, rising from -$8.00 million to -$1.00 million.
- REGENCY ENERGY PARTNERS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, REGENCY ENERGY PARTNERS LP reported lower earnings of $0.04 versus $0.13 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus $0.04).
- RGP's debt-to-equity ratio of 0.68 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
- 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. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full Regency Energy Partners Ratings Report.
- DFT's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 15.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 33.8% when compared to the same quarter one year prior, rising from $13.66 million to $18.27 million.
- Net operating cash flow has significantly increased by 76.90% to $53.11 million when compared to the same quarter last year. In addition, DUPONT FABROS TECHNOLOGY INC has also vastly surpassed the industry average cash flow growth rate of -54.21%.
- 39.72% is the gross profit margin for DUPONT FABROS TECHNOLOGY INC 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 18.36% trails the industry average.
- You can view the full Dupont Fabros Technology Ratings Report.
- DRE's revenue growth has slightly outpaced the industry average of 6.3%. Since the same quarter one year prior, revenues slightly increased by 9.3%. Growth in the company's revenue appears to have helped boost the 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 450.3% when compared to the same quarter one year prior, rising from -$21.96 million to $76.93 million.
- Net operating cash flow has increased to $118.13 million or 21.00% when compared to the same quarter last year. In addition, DUKE REALTY CORP has also vastly surpassed the industry average cash flow growth rate of -54.21%.
- DUKE REALTY CORP reported significant earnings per share improvement 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, DUKE REALTY CORP turned its bottom line around by earning $0.06 versus -$0.51 in the prior year. For the next year, the market is expecting a contraction of 491.7% in earnings (-$0.24 versus $0.06).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, DUKE REALTY CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Duke Realty Ratings Report.
- Our dividend calendar.