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." AllianceBernstein Holding L.P (NYSE: AB) shares currently have a dividend yield of 9.40%. AllianceBernstein Holding L.P. provides investment management and related services in the United States and internationally. The company has a P/E ratio of 14.92. The average volume for AllianceBernstein Holding L.P has been 395,200 shares per day over the past 30 days. AllianceBernstein Holding L.P has a market cap of $2.4 billion and is part of the financial services industry. Shares are up 17.8% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates AllianceBernstein Holding L.P as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow. Highlights from the ratings report include:
- AB's very impressive revenue growth greatly exceeded the industry average of 16.6%. Since the same quarter one year prior, revenues leaped by 134.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- ALLIANCEBERNSTEIN HOLDING 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. We feel that this trend should continue. During the past fiscal year, ALLIANCEBERNSTEIN HOLDING LP increased its bottom line by earning $1.72 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($1.75 versus $1.72).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 119.5% when compared to the same quarter one year prior, rising from $26.19 million to $57.47 million.
- The gross profit margin for ALLIANCEBERNSTEIN HOLDING LP is currently very high, coming in at 100.00%. AB has managed to maintain the strong profit margin since the same quarter of last year. Despite the mixed results of the gross profit margin, AB's net profit margin of 91.26% significantly outperformed against the industry.
- You can view the full AllianceBernstein Holding L.P Ratings Report.