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." B&G Foods (NYSE: BGS) shares currently have a dividend yield of 4.40%. B&G Foods, Inc. manufactures, sells, and distributes shelf-stable food and household products in the United States, Canada, and Puerto Rico. The company has a P/E ratio of 30.92. The average volume for B&G Foods has been 338,500 shares per day over the past 30 days. B&G Foods has a market cap of $1.6 billion and is part of the food & beverage industry. Shares are down 12.9% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates B&G Foods as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 2.7%. Since the same quarter one year prior, revenues rose by 21.8%. 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 Food Products industry. The net income increased by 96.6% when compared to the same quarter one year prior, rising from $9.56 million to $18.79 million.
- B&G FOODS INC 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, B&G FOODS INC reported lower earnings of $0.98 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.98).
- In its most recent trading session, BGS 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. 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.
- The debt-to-equity ratio is very high at 2.30 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BGS has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full B&G Foods Ratings Report.