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."National Retail Properties (NYSE: NNN) shares currently have a dividend yield of 4.70%. National Retail Properties, Inc. is a publicly owned equity real estate investment trust. The firm acquires, owns, manages, and develops retail properties in the United States. The company has a P/E ratio of 31.51. The average volume for National Retail Properties has been 1,104,100 shares per day over the past 30 days. National Retail Properties has a market cap of $4.3 billion and is part of the real estate industry. Shares are up 14.8% year-to-date as of the close of trading on Monday. TheStreet Ratings rates National Retail Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share, expanding profit margins and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- NNN's revenue growth has slightly outpaced the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 16.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Net operating cash flow has slightly increased to $59.34 million or 4.92% when compared to the same quarter last year. In addition, NATIONAL RETAIL PROPERTIES has also vastly surpassed the industry average cash flow growth rate of -70.87%.
- NATIONAL RETAIL PROPERTIES's earnings per share improvement from the most recent quarter was slightly positive. 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, NATIONAL RETAIL PROPERTIES increased its bottom line by earning $1.06 versus $1.03 in the prior year. This year, the market expects an improvement in earnings ($1.12 versus $1.06).
- The gross profit margin for NATIONAL RETAIL PROPERTIES is rather high; currently it is at 60.25%. Regardless of NNN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NNN's net profit margin of 42.65% significantly outperformed against the industry.
- The net income growth from the same quarter one year ago has 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 8.8% when compared to the same quarter one year prior, going from $40.66 million to $44.24 million.
- You can view the full National Retail Properties Ratings Report.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Real Estate Investment Trusts (REITs) industry average. The net income increased by 48.7% when compared to the same quarter one year prior, rising from $15.48 million to $23.02 million.
- Net operating cash flow has increased to $61.58 million or 25.92% when compared to the same quarter last year. In addition, W P CAREY INC has also vastly surpassed the industry average cash flow growth rate of -70.87%.
- The gross profit margin for W P CAREY INC is currently very high, coming in at 78.13%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.79% trails the industry average.
- WPC, with its decline in revenue, underperformed when compared the industry average of 8.3%. Since the same quarter one year prior, revenues fell by 18.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- W P CAREY INC 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. 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, W P CAREY INC reported lower earnings of $1.20 versus $2.03 in the prior year. This year, the market expects an improvement in earnings ($1.51 versus $1.20).
- You can view the full W P Carey Ratings Report.
- The revenue growth greatly exceeded the industry average of 7.9%. 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.
- 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. 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.
- Our dividend calendar.