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."Highwoods Properties (NYSE: HIW) shares currently have a dividend yield of 4.50%. Highwoods Properties, Inc. is a real estate investment trust. The trust engages in leasing, management, development, construction, and other customer-related services for its properties and for third parties. It invests in the real estate markets of United States. The company has a P/E ratio of 56.85. The average volume for Highwoods Properties has been 669,900 shares per day over the past 30 days. Highwoods Properties has a market cap of $3.4 billion and is part of the real estate industry. Shares are up 3.4% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Highwoods Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 21.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HIGHWOODS PROPERTIES 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. We feel that this trend should continue. During the past fiscal year, HIGHWOODS PROPERTIES INC increased its bottom line by earning $0.67 versus $0.46 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus $0.67).
- 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 106.5% when compared to the same quarter one year prior, rising from $14.70 million to $30.36 million.
- Net operating cash flow has increased to $69.95 million or 26.26% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.04%.
- You can view the full Highwoods Properties Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 25.8%. 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 Oil, Gas & Consumable Fuels industry. The net income increased by 53.6% when compared to the same quarter one year prior, rising from $220.00 million to $338.00 million.
- Net operating cash flow has increased to $1,287.00 million or 48.27% when compared to the same quarter last year. In addition, KINDER MORGAN INC has also vastly surpassed the industry average cash flow growth rate of -23.28%.
- KINDER MORGAN 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, KINDER MORGAN INC reported lower earnings of $1.15 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $1.15).
- 42.33% is the gross profit margin for KINDER MORGAN INC which we consider to be strong. Regardless of KMI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KMI's net profit margin of 8.72% compares favorably to the industry average.
- You can view the full Kinder Morgan Ratings Report.
- 38.39% is the gross profit margin for COVANTA HOLDING CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.63% is above that of the industry average.
- COVANTA HOLDING 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, COVANTA HOLDING CORP reported lower earnings of $0.35 versus $0.87 in the prior year. This year, the market expects an improvement in earnings ($0.40 versus $0.35).
- CVA, with its decline in revenue, slightly underperformed the industry average of 7.3%. Since the same quarter one year prior, revenues slightly dropped by 1.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Commercial Services & Supplies industry average, but is less than that of the S&P 500. The net income has significantly decreased by 65.8% when compared to the same quarter one year ago, falling from $82.00 million to $28.00 million.
- The share price of COVANTA HOLDING CORP has not done very well: it is down 10.88% 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 Covanta Holding Corporation Ratings Report.
- Our dividend calendar.