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."BP (NYSE: BP) shares currently have a dividend yield of 4.80%. BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products worldwide. The company has a P/E ratio of 6.44. The average volume for BP has been 5,528,300 shares per day over the past 30 days. BP has a market cap of $161.8 billion and is part of the energy industry. Shares are down 1.7% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates BP as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- 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. 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.
- The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.87 is somewhat weak and could be cause for future problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, BP PLC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full BP Ratings Report.
- PCG's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 3.8%. 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 Multi-Utilities industry. The net income increased by 1100.0% when compared to the same quarter one year prior, rising from -$9.00 million to $90.00 million.
- PG&E CORP 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, PG&E CORP reported lower earnings of $1.84 versus $1.91 in the prior year. This year, the market expects an improvement in earnings ($3.02 versus $1.84).
- Even though the current debt-to-equity ratio is 1.01, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Multi-Utilities industry and the overall market, PG&E CORP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full PG&E Ratings Report.
- BBEP's very impressive revenue growth greatly exceeded the industry average of 7.7%. Since the same quarter one year prior, revenues leaped by 50.8%. 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 significantly increased by 253.73% to $90.22 million when compared to the same quarter last year. In addition, BREITBURN ENERGY PARTNERS LP has also vastly surpassed the industry average cash flow growth rate of -23.28%.
- BREITBURN ENERGY PARTNERS LP 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. 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, BREITBURN ENERGY PARTNERS LP continued to lose money by earning -$0.40 versus -$0.60 in the prior year. This year, the market expects an improvement in earnings ($0.88 versus -$0.40).
- The gross profit margin for BREITBURN ENERGY PARTNERS LP is rather high; currently it is at 54.36%. Regardless of BBEP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BBEP's net profit margin of -33.15% significantly underperformed when compared to the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BREITBURN ENERGY PARTNERS LP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full BreitBurn Energy Partners Ratings Report.
- Our dividend calendar.