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." TAL International Group (NYSE: TAL) shares currently have a dividend yield of 6.70%. TAL International Group, Inc., together with its subsidiaries, leases intermodal transportation equipment and provides maritime container management services worldwide. The company operates in two segments, Equipment Leasing and Equipment Trading. The company has a P/E ratio of 9.81. The average volume for TAL International Group has been 574,200 shares per day over the past 30 days. TAL International Group has a market cap of $1.5 billion and is part of the diversified services industry. Shares are down 25.1% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates TAL International Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income. Highlights from the ratings report include:
- TAL's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 3.0%. 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.
- The gross profit margin for TAL INTERNATIONAL GROUP INC is currently very high, coming in at 89.93%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.17% significantly outperformed against the industry average.
- Net operating cash flow has increased to $108.23 million or 41.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 6.39%.
- In its most recent trading session, TAL has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- TAL INTERNATIONAL GROUP INC's earnings per share declined by 10.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, TAL INTERNATIONAL GROUP INC increased its bottom line by earning $4.25 versus $3.87 in the prior year. For the next year, the market is expecting a contraction of 3.8% in earnings ($4.09 versus $4.25).
- You can view the full TAL International Group Ratings Report.
- The revenue growth came in higher than the industry average of 12.8%. Since the same quarter one year prior, revenues slightly increased by 1.1%. 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 Commercial Banks industry average, but is less than that of the S&P 500. The net income increased by 7.5% when compared to the same quarter one year prior, going from $36.83 million to $39.61 million.
- The gross profit margin for VALLEY NATIONAL BANCORP is currently very high, coming in at 76.27%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.90% is above that of the industry average.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
- You can view the full Valley National Bancorp Ratings Report.
- VTR's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- VENTAS INC has improved earnings per share by 8.8% 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 year. We feel that this trend should continue. During the past fiscal year, VENTAS INC increased its bottom line by earning $1.66 versus $1.04 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.66).
- The net income growth from the same quarter one year ago has significantly 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 25.7% when compared to the same quarter one year prior, rising from $86.27 million to $108.44 million.
- Net operating cash flow has increased to $359.33 million or 26.74% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.11%.
- You can view the full Ventas Ratings Report.
- Our dividend calendar.