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." Medical Properties (NYSE: MPW) shares currently have a dividend yield of 6.50%. Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company has a P/E ratio of 22.22. The average volume for Medical Properties has been 1,333,700 shares per day over the past 30 days. Medical Properties has a market cap of $2.1 billion and is part of the real estate industry. Shares are up 6.1% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Medical Properties as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income. 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 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 11.04%.
- 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 23.58% 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.
- The revenue growth came in higher than the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 18.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income increased by 8.5% when compared to the same quarter one year prior, going from $210.41 million to $228.35 million.
- Net operating cash flow has slightly increased to $353.61 million or 8.62% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -23.28%.
- ONEOK PARTNERS -LP's earnings per share improvement from the most recent quarter was slightly positive. 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, ONEOK PARTNERS -LP reported lower earnings of $2.35 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $2.35).
- You can view the full ONEOK Partners L.P Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues rose by 35.4%. 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. In comparison to the other companies in the Capital Markets industry and the overall market, FORTRESS INVESTMENT GRP LLC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The gross profit margin for FORTRESS INVESTMENT GRP LLC is rather high; currently it is at 57.74%. It has increased significantly from the same period last year. Along with this, the net profit margin of 25.78% is above that of the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. 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.
- FORTRESS INVESTMENT GRP LLC 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, FORTRESS INVESTMENT GRP LLC turned its bottom line around by earning $0.65 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus $0.65).
- You can view the full Fortress Investment Group Ratings Report.
- Our dividend calendar.