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."TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.70%. TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 10.12. The average volume for TAL International Group has been 648,100 shares per day over the past 30 days. TAL International Group has a market cap of $1.5 billion and is part of the diversified services industry. Shares are down 21.5% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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 TAL INTERNATIONAL GROUP INC is currently very high, coming in at 89.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.17% significantly outperformed against the industry average.
- Net operating cash flow has increased to $108.23 million or 41.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.28%.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Trading Companies & Distributors industry and the overall market, TAL INTERNATIONAL GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, TAL 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 TAL International Group Ratings Report.
- VZ's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.31% is above that of the industry average.
- Net operating cash flow has significantly increased by 55.03% to $10,431.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 5.17%.
- VERIZON COMMUNICATIONS INC 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, VERIZON COMMUNICATIONS INC increased its bottom line by earning $4.00 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 12.5% in earnings ($3.50 versus $4.00).
- You can view the full Verizon Communications Ratings Report.
- O's very impressive revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues leaped by 62.4%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 64.9% when compared to the same quarter one year prior, rising from $39.02 million to $64.34 million.
- Net operating cash flow has increased to $173.24 million or 46.88% when compared to the same quarter last year. In addition, REALTY INCOME CORP has also vastly surpassed the industry average cash flow growth rate of -54.21%.
- REALTY INCOME CORP has improved earnings per share by 11.8% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, REALTY INCOME CORP reported lower earnings of $0.71 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.71).
- 46.77% is the gross profit margin for REALTY INCOME CORP which we consider to be strong. Regardless of O's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, O's net profit margin of 29.82% compares favorably to the industry average.
- You can view the full Realty Income Corporation Ratings Report.
- Our dividend calendar.