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." National Retail Properties (NYSE: NNN) shares currently have a dividend yield of 4.80%. National Retail Properties, Inc. is a publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States. The company has a P/E ratio of 32.37. The average volume for National Retail Properties has been 1,081,600 shares per day over the past 30 days. National Retail Properties has a market cap of $4.2 billion and is part of the real estate industry. Shares are up 13.2% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates National Retail Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, expanding profit margins, good cash flow from operations 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:
- NNN's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 16.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- NATIONAL RETAIL PROPERTIES's earnings per share improvement from the most recent quarter was slightly positive. 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, NATIONAL RETAIL PROPERTIES increased its bottom line by earning $1.06 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $1.06).
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 60.25%. Regardless of NNN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NNN's net profit margin of 42.65% significantly outperformed against the industry.
- Net operating cash flow has slightly increased to $59.34 million or 4.92% when compared to the same quarter last year. Despite an increase in cash flow, NATIONAL RETAIL PROPERTIES's average is still marginally south of the industry average growth rate of 11.12%.
- The net income growth from the same quarter one year ago has exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 8.8% when compared to the same quarter one year prior, going from $40.66 million to $44.24 million.
- You can view the full National Retail Properties Ratings Report.
- 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 12.1%. 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 a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. 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 came in higher than the industry average of 1.9%. Since the same quarter one year prior, revenues rose by 21.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Food Products industry average. The net income increased by 96.6% when compared to the same quarter one year prior, rising from $9.56 million to $18.79 million.
- B&G FOODS 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, B&G FOODS INC reported lower earnings of $0.98 versus $1.21 in the prior year. This year, the market expects an improvement in earnings ($1.56 versus $0.98).
- 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.
- The debt-to-equity ratio is very high at 2.30 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, BGS has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- You can view the full B&G Foods Ratings Report.
- Our dividend calendar.