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." Valley National Bancorp (NYSE: VLY) shares currently have a dividend yield of 4.20%. Valley National Bancorp operates as the bank holding company for the Valley National Bank that provides commercial, retail, and wealth management financial services. The company has a P/E ratio of 15.48. The average volume for Valley National Bancorp has been 1,293,400 shares per day over the past 30 days. Valley National Bancorp has a market cap of $2.1 billion and is part of the banking industry. Shares are up 2.9% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Valley National Bancorp as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income and attractive valuation levels. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 11.8%. Since the same quarter one year prior, revenues slightly increased by 1.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 76.27%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.90% is above that of the industry average.
- The net income growth from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 7.5% when compared to the same quarter one year prior, going from $36.83 million to $39.61 million.
- VALLEY NATIONAL BANCORP has improved earnings per share by 5.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, VALLEY NATIONAL BANCORP reported lower earnings of $0.67 versus $0.74 in the prior year. For the next year, the market is expecting a contraction of 13.4% in earnings ($0.58 versus $0.67).
- You can view the full Valley National Bancorp Ratings Report.
- VZ's revenue growth has slightly outpaced the industry average of 1.2%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, VERIZON COMMUNICATIONS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for VERIZON COMMUNICATIONS INC is rather high; currently it is at 61.49%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 16.31% is above that of the industry average.
- Net operating cash flow has significantly increased by 55.03% to $10,431.00 million when compared to the same quarter last year. In addition, VERIZON COMMUNICATIONS INC has also vastly surpassed the industry average cash flow growth rate of 4.60%.
- VERIZON COMMUNICATIONS INC 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, VERIZON COMMUNICATIONS INC increased its bottom line by earning $4.00 versus $0.31 in the prior year. For the next year, the market is expecting a contraction of 12.3% in earnings ($3.51 versus $4.00).
- You can view the full Verizon Communications Ratings Report.
- The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues slightly increased by 7.1%. 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 55.75% to $63.69 million when compared to the same quarter last year. In addition, SIX FLAGS ENTERTAINMENT CORP has also vastly surpassed the industry average cash flow growth rate of -32.46%.
- 43.14% is the gross profit margin for SIX FLAGS ENTERTAINMENT CORP which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 8.63% trails the industry average.
- 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. 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.
- SIX FLAGS ENTERTAINMENT CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, SIX FLAGS ENTERTAINMENT CORP reported lower earnings of $1.20 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($1.49 versus $1.20).
- You can view the full Six Flags Entertainment Ratings Report.
- Our dividend calendar.