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."Buckeye Partners (NYSE: BPL) shares currently have a dividend yield of 5.60%. Buckeye Partners, L.P. owns and operates liquid petroleum products pipeline systems in the United States. The company operates through four segments: Pipelines & Terminals, Global Marine Terminals, Merchant Services, and Development & Logistics. The company has a P/E ratio of 22.89. The average volume for Buckeye Partners has been 338,800 shares per day over the past 30 days. Buckeye Partners has a market cap of $9.0 billion and is part of the energy industry. Shares are up 9.8% year-to-date as of the close of trading on Tuesday. TheStreet Ratings rates Buckeye Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, good cash flow from operations, solid stock price performance 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:
- The revenue growth greatly exceeded the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 44.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- BUCKEYE PARTNERS LP 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, BUCKEYE PARTNERS LP increased its bottom line by earning $3.23 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.82 versus $3.23).
- Net operating cash flow has slightly increased to $100.09 million or 6.88% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -22.97%.
- Powered by its strong earnings growth of 114.28% and other important driving factors, this stock has surged by 25.50% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
- 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 the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, BUCKEYE PARTNERS LP's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full Buckeye Partners Ratings Report.
- EPR's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 8.2%. 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 Real Estate Investment Trusts (REITs) industry. The net income increased by 115.6% when compared to the same quarter one year prior, rising from $29.23 million to $63.04 million.
- Net operating cash flow has increased to $75.75 million or 22.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.11%.
- The gross profit margin for EPR PROPERTIES is rather high; currently it is at 68.07%. Regardless of EPR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EPR's net profit margin of 70.37% significantly outperformed against the industry.
- 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 Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, EPR PROPERTIES has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- You can view the full EPR Properties Ratings Report.
- Net operating cash flow has significantly increased by 60.47% to $1,072.00 million when compared to the same quarter last year. In addition, ROGERS COMMUNICATIONS has also vastly surpassed the industry average cash flow growth rate of 4.99%.
- 35.34% is the gross profit margin for ROGERS COMMUNICATIONS which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, RCI's net profit margin of 9.86% significantly trails the industry average.
- RCI, with its decline in revenue, slightly underperformed the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Wireless Telecommunication Services industry and the overall market, ROGERS COMMUNICATIONS's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The debt-to-equity ratio is very high at 3.00 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RCI maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
- You can view the full Rogers Communications Ratings Report.
- Our dividend calendar.