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." BioMed Realty (NYSE: BMR) shares currently have a dividend yield of 4.80%. BioMed Realty Trust, Inc. operates as a real estate investment trust (REIT) that focuses on providing real estate to the life science industry in the United States. The company has a P/E ratio of 102.60. The average volume for BioMed Realty has been 1,379,000 shares per day over the past 30 days. BioMed Realty has a market cap of $4.0 billion and is part of the real estate industry. Shares are up 14.5% year-to-date as of the close of trading on Wednesday. TheStreet Ratings rates BioMed Realty as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins. Highlights from the ratings report include:
- BMR's revenue growth has slightly outpaced the industry average of 6.7%. Since the same quarter one year prior, revenues slightly increased by 10.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- BIOMED REALTY TRUST INC 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 year. We feel that this trend should continue. During the past fiscal year, BIOMED REALTY TRUST INC increased its bottom line by earning $0.20 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.23 versus $0.20).
- 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 25.8% when compared to the same quarter one year prior, rising from $8.17 million to $10.28 million.
- Net operating cash flow has increased to $75.09 million or 20.71% when compared to the same quarter last year. In addition, BIOMED REALTY TRUST INC has also modestly surpassed the industry average cash flow growth rate of 11.11%.
- You can view the full BioMed Realty Ratings Report.