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 which could 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."Plains All American Pipeline (NYSE: PAA) shares currently have a dividend yield of 4.60%. Plains All American Pipeline, L.P., together with its subsidiaries, is engaged in transporting, storing, terminalling, and marketing crude oil, natural gas liquids (NGL), natural gas, and refined products in the United States and Canada. The company has a P/E ratio of 19.26. The average volume for Plains All American Pipeline has been 915,300 shares per day over the past 30 days. Plains All American Pipeline has a market cap of $19.2 billion and is part of the energy industry. Shares are up 2.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Plains All American Pipeline as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, notable return on equity and largely solid financial position with reasonable debt levels by most measures. 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 7.8%. Since the same quarter one year prior, revenues rose by 12.6%. 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 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 Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, PLAINS ALL AMER PIPELNE -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- PAA's debt-to-equity ratio of 0.88 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.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has decreased by 3.4% when compared to the same quarter one year ago, dropping from $320.00 million to $309.00 million.
- You can view the full Plains All American Pipeline Ratings Report.
- BX's very impressive revenue growth greatly exceeded the industry average of 16.8%. Since the same quarter one year prior, revenues leaped by 122.6%. 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 Capital Markets industry and the overall market, BLACKSTONE GROUP LP's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for BLACKSTONE GROUP LP is rather high; currently it is at 54.13%. It has increased significantly from the same period last year. Along with this, the net profit margin of 22.92% is above that of the industry average.
- Net operating cash flow has significantly increased by 259.44% to $815.24 million when compared to the same quarter last year. In addition, BLACKSTONE GROUP LP has also vastly surpassed the industry average cash flow growth rate of 123.99%.
- Powered by its strong earnings growth of 447.36% and other important driving factors, this stock has surged by 66.50% 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, BX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full Blackstone Group Ratings Report.
- 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 61.8% when compared to the same quarter one year prior, rising from $44.64 million to $72.21 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.8%. Since the same quarter one year prior, revenues slightly increased by 4.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Net operating cash flow has increased to $58.52 million or 32.13% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.27%.
- 36.83% is the gross profit margin for SENIOR HOUSING PPTYS TRUST which we consider to be strong. Regardless of SNH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SNH's net profit margin of 36.00% significantly outperformed against the industry.
- You can view the full Senior Housing Properties Ratings Report.
- Our dividend calendar.