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."TECO Energy (NYSE: TE) shares currently have a dividend yield of 4.90%. TECO Energy, Inc., an electric and gas utility holding company, is engaged in the regulated electric and gas utility operations. The company has a P/E ratio of 18.53. The average volume for TECO Energy has been 2,315,700 shares per day over the past 30 days. TECO Energy has a market cap of $3.9 billion and is part of the utilities industry. Shares are up 3.8% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates TECO Energy as a buy. Among the primary strengths of the company is its generally strong cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself. Highlights from the ratings report include:
- Net operating cash flow has slightly increased to $152.50 million or 2.28% when compared to the same quarter last year. In addition, TECO ENERGY INC has also modestly surpassed the industry average cash flow growth rate of -2.81%.
- Despite the stagnant revenue growth, the company outperformed against the industry average of 2.2%. Since the same quarter one year prior, revenues have remained constant. Even though the company's revenue remained stagnant, the earnings per share decreased.
- TECO ENERGY INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, TECO ENERGY INC reported lower earnings of $0.92 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.01 versus $0.92).
- Even though the current debt-to-equity ratio is 1.29, it is still below the industry average, suggesting that this level of debt is acceptable within the Multi-Utilities industry. Despite the fact that TE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.56 is low and demonstrates 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, TECO ENERGY INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full TECO Energy Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 27.6%. 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.
- The gross profit margin for MAIN STREET CAPITAL CORP is currently very high, coming in at 83.02%. Regardless of MAIN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MAIN's net profit margin of 63.38% significantly outperformed against the industry.
- In its most recent trading session, MAIN 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.
- 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. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, MAIN STREET CAPITAL CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- MAIN STREET CAPITAL CORP's earnings per share declined by 30.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MAIN STREET CAPITAL CORP reported lower earnings of $2.66 versus $3.54 in the prior year. For the next year, the market is expecting a contraction of 14.1% in earnings ($2.29 versus $2.66).
- You can view the full Main Street Capital Corporation Ratings Report.
- MATTEL INC has improved earnings per share by 23.0% 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, MATTEL INC increased its bottom line by earning $2.60 versus $2.21 in the prior year. This year, the market expects an improvement in earnings ($2.67 versus $2.60).
- The current debt-to-equity ratio, 0.49, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, MAT has a quick ratio of 2.20, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for MATTEL INC is rather high; currently it is at 56.68%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.47% is above that of 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. In comparison to other companies in the Leisure Equipment & Products industry and the overall market on the basis of return on equity, MATTEL INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- MAT, with its decline in revenue, slightly underperformed the industry average of 0.1%. Since the same quarter one year prior, revenues slightly dropped by 6.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full Mattel Ratings Report.
- Our dividend calendar.