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."Regal Entertainment Group (NYSE: RGC) shares currently have a dividend yield of 4.60%. Regal Entertainment Group, through its subsidiaries, operates as a motion picture exhibitor in the United States. The company develops, acquires, and operates multi-screen theatres primarily in mid-sized metropolitan markets and suburban growth areas of larger metropolitan markets. The company has a P/E ratio of 18.92. The average volume for Regal Entertainment Group has been 1,149,600 shares per day over the past 30 days. Regal Entertainment Group has a market cap of $2.5 billion and is part of the media industry. Shares are down 2.6% year-to-date as of the close of trading on Friday. TheStreet Ratings rates Regal Entertainment Group as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth 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:
- RGC's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 13.1%. 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.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- REGAL ENTERTAINMENT GROUP 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, REGAL ENTERTAINMENT GROUP increased its bottom line by earning $1.00 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $1.00).
- The gross profit margin for REGAL ENTERTAINMENT GROUP is rather low; currently it is at 19.25%. Regardless of RGC's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RGC's net profit margin of -0.16% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Media industry. The net income has significantly decreased by 105.3% when compared to the same quarter one year ago, falling from $22.50 million to -$1.20 million.
- You can view the full Regal Entertainment Group Ratings Report.
- The revenue growth came in higher than the industry average of 8.7%. Since the same quarter one year prior, revenues rose by 26.7%. 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 increased to $29.78 million or 32.17% when compared to the same quarter last year. In addition, NATIONAL HEALTH INVESTORS has also vastly surpassed the industry average cash flow growth rate of -41.99%.
- The gross profit margin for NATIONAL HEALTH INVESTORS is currently very high, coming in at 74.30%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NHI's net profit margin of 84.56% significantly outperformed against the industry.
- NATIONAL HEALTH INVESTORS's earnings per share declined by 17.3% 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, NATIONAL HEALTH INVESTORS increased its bottom line by earning $2.76 versus $2.61 in the prior year. This year, the market expects an improvement in earnings ($3.16 versus $2.76).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NHI has underperformed the S&P 500 Index, declining 7.18% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
- You can view the full National Health Investors Ratings Report.
- PEOPLE'S UNITED FINL INC has improved earnings per share by 12.5% 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, PEOPLE'S UNITED FINL INC increased its bottom line by earning $0.74 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.83 versus $0.74).
- PBCT's revenue growth trails the industry average of 29.8%. 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 gross profit margin for PEOPLE'S UNITED FINL INC is currently very high, coming in at 88.73%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.83% 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. 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.
- You can view the full People's United Financial Ratings Report.
- Our dividend calendar.