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."Healthcare Realty (NYSE: HR) shares currently have a dividend yield of 5.00%. Healthcare Realty Trust Incorporated is an independent real estate investment trust. The firm invests in real estate markets of the United States. The average volume for Healthcare Realty has been 472,000 shares per day over the past 30 days. Healthcare Realty has a market cap of $2.3 billion and is part of the real estate industry. Shares are up 13.1% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Healthcare Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, growth in earnings per share and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- HR's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 15.0%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 293.8% when compared to the same quarter one year prior, rising from -$6.39 million to $12.38 million.
- Net operating cash flow has increased to $48.86 million or 10.72% when compared to the same quarter last year. Despite an increase in cash flow, HEALTHCARE REALTY TRUST INC's average is still marginally south of the industry average growth rate of 10.91%.
- HEALTHCARE REALTY TRUST 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, HEALTHCARE REALTY TRUST INC swung to a loss, reporting -$0.14 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus -$0.14).
- The gross profit margin for HEALTHCARE REALTY TRUST INC is currently lower than what is desirable, coming in at 28.95%. Regardless of HR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 13.70% trails the industry average.
- You can view the full Healthcare Realty 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 19.6%. 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 $39.24 million or 28.22% 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 MEDICAL PROPERTIES TRUST is rather high; currently it is at 50.44%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MPW's net profit margin of 26.36% compares favorably to the industry average.
- MEDICAL PROPERTIES TRUST's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, MEDICAL PROPERTIES TRUST increased its bottom line by earning $0.59 versus $0.54 in the prior year.
- The share price of MEDICAL PROPERTIES TRUST has not done very well: it is down 20.95% 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. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full Medical Properties Ratings Report.
- Powered by its strong earnings growth of 111.91% and other important driving factors, this stock has surged by 44.49% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RRD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- DONNELLEY (R R) & SONS CO 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. We feel that this trend should continue. During the past fiscal year, DONNELLEY (R R) & SONS CO turned its bottom line around by earning $1.15 versus -$3.61 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $1.15).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Commercial Services & Supplies industry. The net income increased by 112.2% when compared to the same quarter one year prior, rising from -$849.00 million to $104.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 6.9%. Since the same quarter one year prior, revenues slightly increased by 3.6%. 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 Commercial Services & Supplies industry and the overall market, DONNELLEY (R R) & SONS CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full R.R. Donnelley & Sons Company Ratings Report.
- Our dividend calendar.