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."United Bankshares (NASDAQ: UBSI) shares currently have a dividend yield of 4.30%. United Bankshares, Inc., through its subsidiaries, provides commercial and retail banking services and products in the United States. Its deposit products include checking, savings, time, and money market accounts; and demand deposits, statement and special savings, and NOW accounts. The company has a P/E ratio of 18.24. The average volume for United Bankshares has been 382,500 shares per day over the past 30 days. United Bankshares has a market cap of $2.1 billion and is part of the banking industry. Shares are down 4.8% year-to-date as of the close of trading on Friday. TheStreet Ratings rates United Bankshares as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins 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:
- The gross profit margin for UNITED BANKSHARES INC/WV is currently very high, coming in at 85.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.92% significantly outperformed against the industry average.
- UNITED BANKSHARES INC/WV's earnings per share declined by 7.1% 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, UNITED BANKSHARES INC/WV increased its bottom line by earning $1.70 versus $1.64 in the prior year. This year, the market expects an improvement in earnings ($1.87 versus $1.70).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.8%. Since the same quarter one year prior, revenues slightly dropped by 7.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
- Net operating cash flow has decreased to $35.45 million or 11.88% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full United Bankshares Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 29.5%. 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 exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 26.4% when compared to the same quarter one year prior, rising from $640.00 million to $809.00 million.
- Net operating cash flow has increased to $1,191.00 million or 38.00% when compared to the same quarter last year. In addition, KINDER MORGAN ENERGY -LP has also vastly surpassed the industry average cash flow growth rate of -23.15%.
- 41.54% is the gross profit margin for KINDER MORGAN ENERGY -LP which we consider to be strong. Regardless of KMP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KMP's net profit margin of 23.30% significantly outperformed against the industry.
- 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, KINDER MORGAN ENERGY -LP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- You can view the full Kinder Morgan Energy Partners Ratings Report.
- VANGUARD NATURAL RESOURCES 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 year. We feel that this trend should continue. During the past fiscal year, VANGUARD NATURAL RESOURCES turned its bottom line around by earning $0.75 versus -$2.76 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $0.75).
- 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 101.0% when compared to the same quarter one year prior, rising from -$201.51 million to $2.11 million.
- Net operating cash flow has increased to $61.83 million or 36.40% when compared to the same quarter last year. In addition, VANGUARD NATURAL RESOURCES has also vastly surpassed the industry average cash flow growth rate of -23.15%.
- The gross profit margin for VANGUARD NATURAL RESOURCES is rather high; currently it is at 63.41%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.95% trails the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.9%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Vanguard Natural Resources Ratings Report.
- Our dividend calendar.