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." Consolidated Edison (NYSE: ED) shares currently have a dividend yield of 4.70%. Consolidated Edison, Inc. is engaged in regulated electric, gas, and steam delivery businesses in the United States. The company has a P/E ratio of 15.07. The average volume for Consolidated Edison has been 2,426,300 shares per day over the past 30 days. Consolidated Edison has a market cap of $15.6 billion and is part of the utilities industry. Shares are down 3.1% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates Consolidated Edison as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- Net operating cash flow has increased to $1,314.00 million or 36.73% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -2.65%.
- CONSOLIDATED EDISON INC has improved earnings per share by 12.9% 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, CONSOLIDATED EDISON INC reported lower earnings of $3.61 versus $3.86 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $3.61).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Multi-Utilities industry average. The net income increased by 13.0% when compared to the same quarter one year prior, going from $207.00 million to $234.00 million.
- You can view the full Consolidated Edison Ratings Report.