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."Spectra Energy Partners (NYSE: SEP) shares currently have a dividend yield of 4.60%. Spectra Energy Partners, LP operates as an investment arm of Spectra Energy Corp. The company has a P/E ratio of 6.94. The average volume for Spectra Energy Partners has been 254,100 shares per day over the past 30 days. Spectra Energy Partners has a market cap of $13.6 billion and is part of the energy industry. Shares are up 4.9% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Spectra Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, expanding profit margins and impressive record of earnings per share growth. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook. Highlights from the ratings report include:
- SEP's very impressive revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues leaped by 781.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 502.50% and other important driving factors, this stock has surged by 26.81% 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, SEP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- 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 1035.1% when compared to the same quarter one year prior, rising from $48.10 million to $546.00 million.
- 47.69% is the gross profit margin for SPECTRA ENERGY PARTNERS LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SEP's net profit margin of 105.00% significantly outperformed against the industry.
- SPECTRA ENERGY PARTNERS LP 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, SPECTRA ENERGY PARTNERS LP increased its bottom line by earning $3.75 versus $1.70 in the prior year. For the next year, the market is expecting a contraction of 32.5% in earnings ($2.53 versus $3.75).
- You can view the full Spectra Energy Partners Ratings Report.
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 19.6%. 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.
- Net operating cash flow has increased to $39.24 million or 28.22% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.27%.
- MEDICAL PROPERTIES TRUST's earnings per share declined by 50.0% 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, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.59 versus $0.54 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.59).
- The gross profit margin for MEDICAL PROPERTIES TRUST is rather high; currently it is at 50.44%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 26.36% compares favorably to the industry average.
- The share price of MEDICAL PROPERTIES TRUST has not done very well: it is down 18.50% 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Medical Properties Ratings Report.
- The revenue growth greatly exceeded the industry average of 16.8%. Since the same quarter one year prior, revenues rose by 27.6%. 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 gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 83.02%. Regardless of MAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAIN's net profit margin of 63.38% significantly outperformed against the industry.
- In its most recent trading session, MAIN 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.
- 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 Capital Markets industry and the overall market on the basis of return on equity, MAIN STREET CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- MAIN STREET CAPITAL CORP's earnings per share declined by 30.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MAIN STREET CAPITAL CORP reported lower earnings of $2.66 versus $3.54 in the prior year. For the next year, the market is expecting a contraction of 13.9% in earnings ($2.29 versus $2.66).
- You can view the full Main Street Capital Corporation Ratings Report.
- Our dividend calendar.