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." BCE (NYSE: BCE) shares currently have a dividend yield of 5.20%. BCE Inc., a communications company, provides broadband communication services to residential and business customers in Canada. The company operates through four segments: Bell Wireline, Bell Wireless, Bell Media, and Bell Aliant. The company has a P/E ratio of 17.95. The average volume for BCE has been 694,200 shares per day over the past 30 days. BCE has a market cap of $33.3 billion and is part of the telecommunications industry. Shares are down 0.3% year-to-date as of the close of trading on Monday. TheStreet Ratings rates BCE as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- BCE's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 4.3%. 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 significantly increased by 112.97% to $1,838.00 million when compared to the same quarter last year. In addition, BCE INC has also vastly surpassed the industry average cash flow growth rate of 4.60%.
- Even though the current debt-to-equity ratio is 1.26, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
- 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. When compared to other companies in the Diversified Telecommunication Services industry and the overall market, BCE INC's return on equity is below that of both the industry average and the S&P 500.
- The share price of BCE INC has not done very well: it is down 7.89% 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. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
- You can view the full BCE Ratings Report.
- VTR's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- VENTAS INC has improved earnings per share by 8.8% 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, VENTAS INC increased its bottom line by earning $1.66 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.66).
- 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 Real Estate Investment Trusts (REITs) industry average. The net income increased by 25.7% when compared to the same quarter one year prior, rising from $86.27 million to $108.44 million.
- Net operating cash flow has increased to $359.33 million or 26.74% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.91%.
- You can view the full Ventas Ratings Report.
- The revenue growth came in higher than the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 26.7%. 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 $29.78 million or 32.17% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 10.91%.
- The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 74.30%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NHI's net profit margin of 84.56% significantly outperformed against the industry.
- NATIONAL HEALTH INVESTORS's earnings per share declined by 17.3% 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $2.76 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.76).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, NATIONAL HEALTH INVESTORS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full National Health Investors Ratings Report.
- Our dividend calendar.